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Full text of "North Carolina Register v.7 no. 20 (1/15/1993)"

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B 



The 
NORTH CAROLINA 



REGISTER 




IN THIS ISSUE 




EXECUTIVE ORDERS 




PROPOSED RULES 




Agriculture 

Cosmetic Art Examiners 




Cultural Resources 




Electrical Contractors 




Environment, Health, and Natural Resources 


Human Resources 




Insurance 
Optometry 


RECEIVED 


LIST OF RULES CODIFIED 


JAN 26 1993 


RRC OBJECTIONS 


LAW. LIBRARY 



RULES INVALIDATED BY JUDICIAL DECISION 



CONTESTED CASE DECISIONS 



ISSUE DATE: January 15, 1993 

Volume 7 • Issue 20 • Pages 2216 - 2381 



INFORMATION ABOUT THE NORTH CAROLINA REGISTER AND ADMINISTRATIVE CODE 



NORTH CAROLINA REGISTER 



TEMPORARY RULES 



The North Carolina Register is published twice a month and 
contains information relating to agency, executive, legislative and 
judicial actions required by or affecting Chapter 150B of the 
General Statutes. All proposed administrative rules and notices of 
public hearings filed under G.S. 150B-21.2 must be published in 
the Register. The Register will typically comprise approximately 
fifty pages per issue of legal text. 

State law requires that a copy of each issue be provided free of 
charge to each county in the state and to various state officials and 
institutions. 

The North Carolina Register is available by yearly subscription 
at a cost of one hundred and five dollars ($105.00) for 24 issues. 
Individual issues may be purchased for eight dollars (S8.00). 

Requests for subscription to the North Carolina Register should 
be directed to the Office of Administrative Hearings, 
P. 0. Drawer 27447, Raleigh. N. C. 2761 1-7447. 



Under certain emergency conditions, agencies may issue 
temporary rules. Within 24 hours of submission to OAH, the 
Codifier of Rules must review the agency's written statement of 
findings of need for the temporary rule pursuant to the provisions in 
G.S. 150B-21.1. If the Codifier determines that the findings meet 
the criteria in G.S. 150B-21.1, the rule is entered into the NCAC. If 
the Codifier determines that the findings do not meet the criteria, 
the rule is returned to the agency. The agency may supplement its 
findings and resubmit the temporary rule for an additional review 
or the agency may respond that it will remain with its initial 
position. The Codifier, thereafter, will enter the rule into the 
NCAC. A temporary rule becomes effective either when the 
Codifier of Rules enters the rule in the Code or on the sixth 
business day after the agency resubmits the rule without change. 
The temporary rule is in effect for the period specified in the rule or 
180 days, whichever is less. An agency adopting a temporary ntle 
must begin rule-making procedures on the permanent rule at the 
same time the temporary rule is filed with the Codifier. 



ADOPTION AMENDMENT, AND REPEAL OF 
RULES 



NORTH CAROLINA ADMINISTRATIVE CODE 



The following is a generalized statement of the procedures to be 
followed for an agency to adopt, amend, or repeal a rule. For the 
specific statutory authority, please consult Article 2A of Chapter 
150B of the General Statutes. 

Any agency intending to adopt, amend, or repeal a rule must 
first publish notice of the proposed action in the North Carolina 
Register. The notice must include the time and place of the public 
hearing (or instructions on how a member of the public may request 
a hearing); a statement of procedure for public comments; the text 
of the proposed rule or the statement of subject matter; the reason 
for the proposed action; a reference to the statutory authority for the 
action and the proposed effective date. 

Unless a specific statute provides otherwise, at least 15 days 
must elapse following publication of the notice in the North 
Carolina Register before the agency may conduct the public 
hearing and at least 30 days must elapse before the agency can take 
action on the proposed rule. An agency may not adopt a rule that 
differs substantially from the proposed form published as part of 
the public notice, until the adopted version has been published in 
the North Carolina Register for an additional 30 day comment 
period. 

When final action is taken, the promulgating agency must file 
the rule with the Rules Review Commission (RRC). After approval 
by RRC, the adopted rule is filed with the Office of Administrative 
Hearings (OAH). 

A rule or amended rule generally becomes effective 5 business 
days after the rule is filed with the Office of Administrative 
Hearings for publication in the North Carolina Administrative Code 
(NCAC). 

Proposed action on rules may be withdrawn by the promulgating 
agency at any time before final action is taken by the agency or 
before filing with OAH for publication in the NCAC. 



The North Carolina Administrative Code (NCAC) is a 
compilation and index of the administrative rules of 25 state 
agencies and 38 occupational licensing boards. The NCAC 
comprises approximately 15,000 letter size, single spaced pages of 
material of which approximately 35% of is changed annually. 
Compilation and publication of the NCAC is mandated by G.S. 
150B-21.18. 

The Code is divided into Titles and Chapters. Each state agency 
is assigned a separate title which is further broken down by 
chapters. Title 21 is designated for occupational licensing boards. 

The NCAC is available in two formats. 

(1) Single pages may be obtained at a minimum cost of 
two dollars and 50 cents (S2.50) for 10 pages or less, 
plus fifteen cents (SO. 15) per each additional page. 

(2) The full publication consists of 53 volumes, totaling in 
excess of 15.000 pages. It is supplemented monthly 
with replacement pages. A one year subscription to the 
full publication including supplements can be 
purchased for seven hundred and fifty dollars 
(S750.00). Individual volumes may also be purchased 
with supplement service. Renewal subscriptions for 
supplements to the initial publication are available. 

Requests for pages of rules or volumes of the NCAC should be 
directed to the Office of Administrative Hearings. 



CITATION TO THE NORTH CAROLINA 
REGISTER 

The North Carolina Register is cited by volume, issue, page 
number and date. 1:1 NCR 101-201, April 1, 1986 refers to 
Volume 1, Issue 1, pages 101 through 201 of the North Carolina 
Register issued on April 1, 1986. 



FOR INFORMATION CONTACT: Office of 
Administrative Hearings, ATTN: Rules Division, P.O. 
Drawer 27447, Raleigh, North Carolina 27611-7447, (919) 
733-2678. 



NORTH 
CAROLINA 
REGISTER 




Office of Administrative Hearings 

P. O. Drawer 27447 

Raleigh, North Carolina 27611-7447 

(919) 733-2678 



Julian Mann III, 

Director 
James R. Scarcella Sr., 

Deputy Director 
Molly Masich, 

Director of APA Services 



Staff: 

Ruby Creech, 

Publications Coordinator 
Teresa Kilpatrick, 

Editorial Assistant 
Jean Shirley. 

Editorial Assistant 



ISSUE CONTENTS 



I. EXECUTIVE ORDERS 

Executive Order 184-185 2216 

II. PROPOSED RULES 
Agriculture 

Plant Industry 2219 

Cultural Resources 

Archives and History 2224 

Environment. Health, and 
Natural Resources 

Environmental Management, Water 
Control 2308 

Human Resources 

Medical Assistance 2228 

Mental Health, Developmental 
Disabilities and Substance Abuse 
Services 2225 

Insurance 

Admission Requirements 2304 

Consumer Services 2239 

Financial Evaluation 2242 

Life and Health 2300 

Licensing Boards 

Cosmetic Art Examiners 2331 

Electrical Contractors 2332 

Optometry 2338 

III. LIST OF RULES CODIFIED 2352 

IV. RRC OBJECTIONS 2360 

V. RULES INVALIDATED BY 

JUDICIAL DECISION 2364 

VI. CONTESTED CASE DECISIONS 

Index to ALJ Decisions 2365 

Text of Selected Decisions 

90 OSP 1 377 2367 

91 DST 1450 2372 

92 EHR 0923 2376 

VII. CUMULATIVE INDEX 2379 



NORTH CAROLINA REGISTER 

Publication Schedule 
(August 1992 - December 1993) 







Last Day 


Earliest 


Earliest 










for Elec- 


Date for 


Date for 


Last Day 


^Earliest 


Issue 


Last Day 


tronic 


Public 


Adoption 


to Submit 


Effective 


Date 


for Filing 


Filing 


Hearing 


by Agency 


to RRC 


Date 


08/03/92 


07/13/92 


07/20/92 


08/18/92 


>■: ^c i-; ^f. ^ ;?; ^ 

09/02/92 


09/20/92 


11/02/92 


08/14/92 


07/24/92 


07/31/92 


08/29/92 


09/13/92 


09/20/92 


11/02/92 


09/01/92 


08/11/92 


08/18/92 


09/16/92 


10/01/92 


10/20/92 


12/01/92 


09/15/92 


08/25/92 


09/01/92 


09/30/92 


10/15/92 


10/20/92 


12/01/92 


10/01/92 


09/10/92 


09/17/92 


10/16/92 


10/31/92 


11/20/92 


01/04/93 


10/15/92 


09/24/92 


10/01/92 


10/30/92 


11/14/92 


11/20/92 


01/04/93 


11/02/92 


10/12/92 


10/19/92 


11/17/92 


12/02/92 


12/20/92 


02/01/93 


11/16/92 


10/23/92 


10/30/92 


12/01/92 


12/16/92 


12/20/92 


02/01/93 


12/01/92 


11/06/92 


1 1/13/92 


12/16/92 


12/31/92 


01/20/93 


03/01/93 


12/15/92 


11/24/92 


12/01/92 


12/30/92 


01/14/93 


01/20/93 


03/01/93 


01/04/93 


12/09/92 


12/16/92 


01/19/93 


02/03/93 


02/20/93 


04/01/93 


01/15/93 


12/22/92 


12/31/92 


01/30/93 


02/14/93 


02/20/93 


04/01/93 


02/01/93 


01/08/93 


01/15/93 


02/16/93 


03/03/93 


03/20/93 


05/03/93 


02/15/93 


01/25/93 


02/01/93 


03/02/93 


03/17/93 


03/20/93 


05/03/93 


03/01/93 


02/08/93 


02/15/93 


03/16/93 


03/31/93 


04/20/93 


06/01/93 


03/15/93 


02/22/93 


03/01/93 


03/30/93 


04/14/93 


04/20/93 


06/01/93 


04/01/93 


03/11/93 


03/ 1 8/93 


04/16/93 


05/01/93 


05/20/93 


07/01/93 


04/15/93 


03/24/93 


03/31/93 


04/30/93 


05/15/93 


05/20/93 


07/01/93 


05/03/93 


04/12/93 


04/19/93 


05/18/93 


06/02/93 


06/20/93 


08/02/93 


05/14/93 


04/23/93 


04/30/93 


05/29/93 


06/13/93 


06/20/93 


08/02/93 


06/0 1 ,'93 


05/10/93 


05/17/93 


06/16/93 


07/01/93 


07/20/93 


09/01/93 


06/15/93 


05/24/93 


06/01/93 


06/30/93 


07/15/93 


07/20/93 


09/01/03 


07/01/93 


06/10/93 


06/17/93 


07/16/93 


07/31/93 


08/20/93 


10/01/93 


07/15/93 


06/23/93 


06/30/93 


07/30/93 


08/14/93 


08/20/93 


10/01/93 


08/02/93 


07/12/93 


07/19/93 


08/17/93 


09/01/93 


09/20/93 


11/01/93 


08/16/93 


07/26/93 


08/02/93 


08/31/93 


09/15/93 


09/20/93 


11/01/93 


09/01/93 


08/ 1 1 /93 


08/18/93 


09/16/93 


10/01/93 


10/20/93 


12/01/93 


09/15/93 


08/24/93 


08/31/93 


09/30/93 


10/15/93 


10/20/93 


12/01/93 


10/01/93 


09/10/93 


09/17/93 


10 16 93 


10/31/93 


11/20/93 


01/04/94 


10/15/93 


09/24/93 


10/01/93 


10/30/93 


11/14/93 


11/20/93 


01/04/94 


11/01/93 


10/11/93 


10/18/93 


11/16/93 


12/01/93 


12/20/93 


02/01/94 


11/15/93 


10/22/93 


10/29/93 


1 1 /30/93 


12/15/93 


12/20/93 


02/01/94 


12/01/93 


11/05/93 


11/15/93 


1 2/ 1 6/93 


12/31/93 


01/20/94 


03/01/94 


12/15/93 


11/24/93 


12/01/93 


12/30/93 


01/14/94 


01/20/94 


03/01/94 



* The "Earliest Effective Date" is computed assuming that the agency follows the 
publication schedule above, that the Rules Review Commission approves the rule at 
the next calendar month meeting after submission, and that RRC delivers the rule to 
the Codifter of Rules five (5) business days before the 1st business day of the next 
calendar month. 



EXECUTIVE ORDERS 



EXECUTIVE ORDER NUMBER 184 

TRANSFERRING THE COMMUTATION/ 

PARDON ANALYST POSITION 

ASSIGNED TO THE OFFICE OF THE 

GOVERNOR FROM THE OFFICE OF THE 

PAROLE COMMISSION IN THE 

DEPARTMENT OF CORRECTION 

TO THE OFFICE OF THE 

GOVERNOR 

IT BEING FOUND that the duties of the 
Commutation/Pardon Analyst assigned to the 
Office of the Governor by the Parole Commission 
can be more economically, efficiently and effec- 
tively performed by that position being removed 
from the Office of the Parole Commission in the 
Department of Correction and transferred to and 
relocated in the Office of the Governor where it 
can be subject to and under the direct supervision 
of the Governor's Legal Counsel; 

THEREFORE, pursuant to the authority 
and powers given to me by Article III, Section 
5(10) of the Constitution and North Carolina 
General Statute 143A-8 and 143B-12, IT IS 
ORDERED: 



Section 1 . 



The Commutation/Pardon 



Analyst position located in the Office of the Parole 
Commission in the Department of Correction and 
assigned to the Office of the Governor, is hereby 
removed from that office and transferred to and 
relocated in the Office of the Governor, subject to 
and under the direct supervision of the Governor's 
Legal Counsel. 

Section 2. The Parole Commission, 
Department of Correction, Office of State Person- 
nel and the Office of State Budget and Manage- 
ment shall do all such things as are required to 
effect this transfer and relocation. 

Section 3. Reports of this transfer and 
relocation shall be made as required by N.C.G.S. 
143B-12(b). My Chief of Staff is directed to do 
the same. 

Section 4. This Order shall be effective as 
of October 1, 1992. 

Done in the Capitol City of Raleigh, North 
Carolina, this the 22nd day of December, 1992. 



EXECUTIVE ORDER NUMBER 185 

EXTENSION OF EXECUTIVE ORDERS 

12, 13, 15, 27, 29. 39, 43, 53. 

55. 66. 71, 78, 99, 110, 121, 126, 

132, 136, 139, 143, 150, 151, 152, 

153. AND 156. 

AND 

RESCISSION OF EXECUTIVE ORDERS 

20, 22, 26, 35, 86, 89, 95, 114, 122, 124, 134, 

137, 140 AND 145. 

Pursuant to the authority vested in me as Governor 
by the Constitution and laws of North Carolina, IT 
IS ORDERED: 

Section L EXTENSION OF EXECUTIVE 

ORDERS 

The Governor's Highway Safety Commis- 
sion, established by E.O. 12, extended by E.O. 
51. reissued by 93, and extended by 161, is hereby 
extended without amendment for two years. 

The North Carolina State Health Coordi- 
nating Council, established by E.O. 13, amended 
by E.O. 51 and 93. and extended by 161. is 
hereby extended without amendment for two years. 

The Juvenile Justice Planning Committee, 
established by E.O. 15. amended by E.O. 59. 94, 
and 131, is hereby extended without amendment 
for two years. 

The North Carolina Fund for Children and 
Families Commission, established by E.O. 27, 
amended by E.O. 47 and 93, and extended by 161, 
is hereby extended without amendment for two 
years. 

The Governor's Task Force on Racial, 
Religious, and Ethnic Violence and Intimidation, 
established by E.O. 29, amended by E.O. 44. 93. 
and 161, is hereby extended without amendment 
for two years. 

The Board of Trustees of the North Caro- 
lina Public Employee Deferred Compensation 
Plan, established by E.O. 39. reissued by E.O. 93, 
and extended by 161. is hereby extended without 
amendment for two years. 

The North Carolina Emergency Response 
Commission, established by E.O. 43, amended by 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2216 



EXECUTWE ORDERS 



E.O. 48 and 50. reissurd by 93. and amended by 
165. is hereby extended without amendment for 
two years. 

The Governor's Inter-Agency Advisory 
Team on Alcohol and Other Drug Abuse, estab- 
lished by E.O. 53. amended by E.O. 72. 85. 144. 
and 154, is hereby extended without amendment 
for two years. 

The Martin Luther King. Jr. Holiday 
Commission, established by E.O. 55. extended by 
E.O. 101 and 161. is hereby extended without 
amendment for two years. 

The State Employee's Combined Cam- 
paign, established by E.O. 66. extended by E.O. 
106 and 173. is hereby extended until rescinded. 

The Governor's Task Force on Rail 
Passenger Service, established by E.O. 71. extend- 
ed by E.O. 94. and amended by 125. is hereby 
extended, retroactive to December 30. 1991. 
without amendment for three years. 

The Governor's Task Force on Injun,' 
Prevention, established by E.O. 78. amended and 
extended by E.O. 116. is hereby extended, retro- 
active to November 1. 1992. for two years with 
the following amendment: Section 3 Functions 

• • • • 



The Governor's Highway Beautification 
Council, established by E.O. 126, amended by 
133. is hereby extended, retroactive to September 
18. 1992. without amendment for two years. 

The Governor's Council on Alcohol and 
Other Drug Abuse, established by E.O. 132. is 
hereby extended without amendment for two years. 

The North Carolina Advisory Council on 
Telecommunications in Education, established by 
E.O. 136. is hereby extended without amendment 
for two years. 

The Governor's Volunteer Advisory 
Council, established bv E.O. 139. is herebv 
extended without amendment for two years. 

The North Carolina Advisory Council on 
Vocational and Applied Technology Education, 
established by E.O. 143. is hereby extended 
without amendment for two years. 

The North Carolina Human Service 
Transportation Council, established by E.O. 150, 
is hereby extended without amendment for two 
years . 

The Governor's Advisory Commission on 
Military Affairs, established by E.O. 151. amend- 
ed by E.O. 163 and 170. is hereby extended 
without amendment for two years. 



B. The Task Force shall advise the Inju- 
ry Control Section of the Department 
of Environment. Health, and Natural 
Resources: as well as the Injun,' Pre- 
vention Research Center. 

The Governor's Commission on Reduction 
of Infant Mortality, established by E.O. 99. is 
hereby extended, retroactive to December 13. 
1991. without amendment for three years. 

The Governor's Advisory Council on 
International Trade, established by E.O. 1 10. 
extended by E.O. 161. is hereby extended without 
amendment for two vears. 



The Persian Gulf War Memorial Commis- 
sion, established by E.O. 152. amended by 160 
and 167. is hereby extended without amendment 
for a period of two years. 

The North Carolina 2000 Steering Com- 
mittee, established by E.O. 153. is hereby extend- 
ed without amendment for a period of two vears. 

The North Carolina Committee on Litera- 
cy and Basic Skills, established by E.O. 156. is 
hereby extended without amendment for two years. 

Section 2. RESCISSION OF EXECUTIVE 

ORDERS 



The Governor's Minority. Female, and 
Disabled-Owned Businesses Construction Contrac- 
tors Advisory Committee, established by E.O. 
121 . amended by 129. is hereby extended, retroac- 
tive to July 1 1 . 1992. without amendment for two 
vears. 



E.O. 20. which implemented a wellness 
improvement program for state employees, is 
hereby rescinded. 

E.O. 22. which implemented certain 
economies in North Carolina state government to 



2217 



7:20 



SORTH CAROLINA REGISTER 



January 15, 1993 



EXECUTIVE ORDERS 



respond to United States legislation requiring a 
federal balanced budget, is hereby rescinded. 

Operation Hay, implemented by E.O. 26, 
is hereby rescinded. 

E.O. 35, which transferred the State 
Information Processing Services from the Depart- 
ment of Administration to the Office of State 
Controller, is hereby rescinded. 

E.O. 86, which outlined the State's pro- 
gram for reduction of (1) solid, hazardous, and 
infectious waste and (2) toxic air pollutants, is 
hereby rescinded. 

E.O. 89. which transferred the State 
Employee's Advisory Group from the Department 
of Administration to the Office of State Personnel, 
is hereby rescinded. 

The Governor's Blue Ribbon Commission 
on Coastal Initiatives, established by E.O. 95, is 
hereby rescinded. 

E.O. 114, which required certain adjust- 
ments in the 1989-91 budget to balance the budget, 
and its amendments in E.O. 130 and 164, are 
hereby rescinded. 

The Governor's Council of Fiscal Advi- 
sors, established in E.O. 122, is hereby rescinded. 

The Governor's Task Force on Prison 
Construction and Consolidation, established in 
E.O. 124, is hereby rescinded. 

E.O. 134, which granted readjustment 
leave to state employees who had served in the 
Persian Gulf War, is hereby rescinded. 

E.O. 137, which implemented an escrow 
account for contributions to the Teachers' and 
State Employees' Retirement System, and its 
amendments in E.O. 138 and 158, are hereby 
rescinded. 

Special Commission to Investigate Short- 
ages in the Northampton County Schools' Financ- 
es, established in E.O. 140, is hereby rescinded. 

E.O. 145, which transferred the Commu- 
nity Penalties Program from the Department of 
Crime Control and Public Safety to the Depart- 
ment of Correction, and its suspension in E.O. 



146, are hereby rescinded. 

This Executive Order is effective immedi- 
ately. 

Done in Raleigh this 29th day of Decem- 
ber, 1992. 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



22 IS 



PROPOSED RULES 



TITLE 2 - DEPARTMENT OF AGRICULTURE 

l\ otice is hereby given in accordance with G.S. 150B-21.2 that the N. C. Plant Conservation Board intends 
to amend rules cited as 2 NCAC 48F .0301 and .0302. 

1 he proposed effective date of this action is April 1 , 1993. 

1 lie public hearing will be conducted at 10:00 a.m. on February 1 . 1993 at the Board Room, Agriculture 
Bldg.. 2 W. Edenton Street, Raleigh, NC 27601. 

EVeason for Proposed Action: To change protected status of several plant species. 

Inurnment Procedures: Interested persons may present statements either orally or in writing at the public 
hearing or in writing prior to February 14, 1993 by mail addressed to Cecil Frost, Secretary of the North 
Carolina Plant Conservation Board, P.O. Box 27647, Raleigh, NC 2761 1-7647. 

CHAPTER 48 - PLANT INDUSTRY 

SUBCHAPTER 48F - PLANT CONSERVATION 

SECTION .0300 - ENDANGERED PLANT SPECIES LIST: THREATENED PLANT SPECIES 
LIST: LIST OF SPECIES OF SPECIAL CONCERN 



.0301 ENDANGERED PLANT SPECIES LIST 

The North Carolina Plant Conservation Board hereby establishes the following list of endangered plant 
species: 

(1) Aeschynomene virginica — (L.) B.S.P. 
Sensitive Jointvetch: 

(2) Amorpha georgiana var. georgiana -- Wilbur 
Georgiana Indigo-bush: 

(3) Arethusa bulbosa — L. 
Bog Rose: 

(4 1 Asplenium heteroresiliens -- W. H. Wagner 
Carolina Spleenwort; 

(5) Asplenium monanthes -- L. 
Single-sorus Spleenwort: 

(6) Aster depauperatus -- Fernald 
Serpentine Aster; 

(7) Bryocrumia andersonii — (Bartr.) Anders. 
Gorge Moss; 

(8) Buckleya distichophylla — (Nuttall) Torrey 
Piratebush: 

(9) Calamagrostis cainii -- Hitchcock 
Cain's Reed Grass; 

449-1 Calamovilfa br e vipilis (Torr e y) Scribn e r 

Pin e Barr e ns Sandr ee d; 
f-H-t ( 10) Cardamine micranthera -- Rollins 

Small-anthered Bittercress; 
*44t (11) Carex aenea -- Fernald 

Fernald's Hay Sedge; 
<4r»-> ( 12) Carex barrattii -- Schweinitz and Torrey 



2219 7:20 NORTH CAROLINA REGISTER January 15, 1993 



PROPOSED RULES 



Barratt's Sedge; 
(44) Carex mnnhartii Bry s on 

Manhart'a Sedge; 
(44) ( 13) Carex schweinitzii — Dewey ex Schweinitz 

Schweinitz's Sedge; 
(4-6) ( 14) Chrysoma pauciflosculosa — (Michx.) Greene 

Woody Goldenrod; 
(44) ( 15) Conioselinum chinense -- (L.) B.S.P. 

Hemlock Parsley; 

(48) (16) Cystopteris tennesseensis — Shaver 
Tennessee Bladderfern; 

(4-9) £17} Dalibarda repens -- L. 

Robin Runaway; 
(30) (18) Delphinium exaltatum -- Aiton 

Tall Larkspur; 
(44-) (19) Echinacea laevigata — (Boynton and Beadle) Blake 

Smooth Coneflower; 

(33) (20) Eriocaulon lineare -- Small 
Linear Pipewort; 

(33) Eupatorium rcsinosum Torrey ex DC 

Resinous Boncaet; 

(34) 12JJ Filipendula rubra - (Hill) B.L. Robins. 
Queen-of-the- Prairie; 

(34) (22) Gentianopsis crinita -- (Froelich) Ma 

Fringed Gentian; 
(3-6) (23) Geum radiatum — Michaux 

Spreading Avens; 
(34) (24) Grammitis nimbata — (Jenm.) Proctor 

Dwarf Polypody Fern; 

(38) (25) Helianthus schweinitzii -- T. & G. 
Schweinitz's Sunflower; 

(39) (26) Hexastylis contracta — Blomquist 
Mountain Heartleaf; 

(39) (27) Hexastylis naniflora — Blomquist 

Dwarf-flowered Heartleaf; 
(34) (28) Houstonia purpurea var. montana -- (Small) Terrell 

Mountain Bluet; 
(43) (29) Hudsonia montana — Nutt. 

Mountain Golden Heather; 

(33) (30) Hydrastis canadensis — L. 
Goldenseal; 

(34) (31) Isotria medeoloides — (Pursh) Raf. 
Small Whorled Pogonia; 

(35) (32) Juncus trifidus ssp. carolinianus — Hamet Ahti 
One-flowered Rush; 

(36) (33) Kalmia cuneata -- Michaux 
White Wicky; 

(34) (34) Lindera melissaefolia — (Walter) Blume 
Southern Spicebush; 

(38) (35) Lindera subcoriacea — Wofford 
Bog Spicebush; 

(39) (36) Lophiola aurea -- Ker-Gawl. 
Golden Crest; 

(49) (37) Lysimachia asperulaefolia — Poiret 
Rough-leaf Loosestrife; 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2220 



PROPOSED RULES 



f4+) (38) Lysimachia fraseri — Duby 

Fraser's Loosestrife; 
{43) (39) Minuartia godfreyi -- (Shinners) McNeill 

Godfrey's Sandwort; 
{43) (40) Minuartia uniflora -- (Walter) Mattfield 

Single-flowered Sandwort; 
f44-) (41 ) Muhlenbergia torreyana — (Schultes) Hitchcock 

Torrey's Muhly; 
{4S) (42) Myrica gale -- L. 

Sweet Gale; 
f46) (43) Narthecium americanum — Ker 

Bog Asphodel; 
{47) (44) Orbexilum macrophyllum -- (Rowlee ex Small) Rydberg 

Bigleaf Scurfpea; 
f48-) (45) Orthotrichum keeverae — Crum & Anders. 

Keever's Bristle Moss; 
{49) (46) Oxypolis canbyi - (Coult. & Rose) Fern. 

Canby's Cowbane; 
{SO) (47) Parnassia caroliniana — Michaux 

Carolina Grass-of-Parnassus; 
{54) (48) Pellaea wrightiana — Hooker 

Wright's Cliff-brake Fern; 
f^ (49) Plagiochila caduciloba 

A Liverwort; 
f53) (50) Plantago cordata -- Lam. 

Heart-leaf Plantain; 
<-54) (51 ) Plantago sparsiflora — Michaux 

Pineland Plantain; 
f55-> (52) Platanthera integrilabia — (Correll) Leur 

White Fringeless Orchid; 
{S6) (53) Poa paludigena — Fernald & Wiegand 

Bog Bluegrass; 

(57) (54) Pteroglossaspis ecristata — (Fernald) Rolfe 
Eulophia; 

{§&) (55) Ptilimnium nodosum -- (Rose) Mathias 

Harperella; 
{§9) (56) Pyxidanthera barbulata var. brevifolia — (Wells) Ahles 

Wells' Pyxie-moss; 
f£Q) (57) Rhus michauxii — Sargent 

Michaux's Sumac; 

(58) Rhynchospora crinipes « Gale 
Mosquito beak sedge; 

f64-) (59) Rhynchospora macra — (C.B. Clarke) Small 

Large Beak Sedge; 
f62-> (60) Rudbeckia heliopsidis — Torr. & Gray 

Sun-facing coneflower; 
f&3-> (61 ) Sagittaria fasciculata -- E.O. Beal 

Bunched Arrowhead; 
<-64-> (62) Sarracenia jonesii -- Wherry 

Mountain Sweet Pitcher Plant; 
f654 (63) Sarracenia oreophila — (Kearney) Wherry 

Green Pitcher Plant; 
{€hj (64) Schwalbea americana -- L. 

Chaffseed; 
<-67-> (65) Sedum pusillum -- Michaux 



< 



( 



2221 



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NORTH CAROLINA REGISTER 



Januan 15, 1993 



PROPOSED RULES 



Puck's Orpine; 
{&&} (66) Sedum rosea -- (L.) Scop. 

Roseroot; 
(69-) (67) Senecio schweinitzianus — Nuttall 

Schweinitz's Groundsel; 
f70) 168} Shortia galacifolia - T. & G. 

Oconee Bells; 
f74^ (69) Sisyrinchium dichotomum — Bicknell 

Reflexed Blue-eyed Grass; 
f7-2-) (70) Solidago ptarmicoides -- (Nees) Boivin 

Prairie Goldenrod; 
f?3} (71 ) Solidago pulchra -- Small 

Carolina Goldenrod; 
(74) (72) Solidago spithamaea -- M.A. Curtis 

Blue Ridge Goldenrod; 
f74) 173} Solidago verna -- M.A. Curtis ex T. & G. 

Spring-flowering Goldenrod; 
f76) (74) Spiraea virginiana -- Britton 

Virginia Spiraea; 
f?^) (75) Sporobolus heterolepis — Gray 

Prairie Dropseed; 
f&j (76) Stylisma pickeringii var. pickeringii -- (Torrey ex M.A. Curtis) Gray 

Pickering's Morning Glory; 
fW) (77) Thalictrum cooleyi -- Ahles 

Cooley's Meadowrue; 
f8#) (78) Tortula ammonsiana 

Ammon's Tortula; 
f84-> (79) Trillium pusillum -- Michaux 

Carolina Least Trillium; 
f&2-) (80) Trisetum spicatum var. molle -- (Michaux) Beal 

Soft Trisetum. 

Statutory Authority G.S. 106-202.15. 

.0302 THREATENED PLANT SPECIES LIST 

The North Carolina Plant Conservation Board hereby establishes the following list of threatened plant 
species: 

( 1 ) Amaranthus pumilus — Raf. 
Seabeach Amaranth; 

(2) Amorpha georgiana var. confusa -- Wilbur 
Savanna Indigo-bush; 

(3) Cacalia rugelia — (Shuttl. ex Chapm) Barkley & Cronq. 
Rugel's Ragwort; 

(4) Camassia scilloides -- (Raf.) Cory 
Wild Hyacinth; 

(5-) Carex chapmanii Stcudel 

Chapman' s Sedge; 
(6) 15} Carex conoidea -- Willd. 

Cone-shaped Sedge; 
(6) Carex exilis — Dewey 

Coastal Sedge; 



(7) Carya myristicaeformis — (Michaux f. ) Nuttall 
Nutmeg Hickory; 

(8) Eleocharis halophila — Fern. & Brack. 
Salt Spikerush; 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2222 



PROPOSED RULES 



i9j 
(9) 

(10) 



Eupatorium resinosum 
Resinous boneset: 



Torr. ex DC. 



#3) 



<44t 

i I A | 
I 1 o I 



i i a : I 

i i o i 

{30} 



+33^ 



(334 
f36* 
(37) 

<3^ 



(33) 



Harper ex Small & Britton 



f^5-t 



(10) Fimbristylis perpusilla 
Harper's Fringe-rush; 

(11) Geum geniculatum -- Michaux 
Bent Avens; 

( 12) Glyceria nubigena -- W.A. Anderson 
Smoky Mountain Mannagrass: 

( 13) Gymnoderma lineare — (Evans) Yoshimura & Sharp 
Gnome Finger Lichen: 

(14) Helonias bullata - L. 
Swamp Pink; 

( 15) Ilex collina — Alexander 
Long-stalked Holly: 

( 16) Isoetes piedmontana — (Pfeiffer) Reed 
Piedmont Quilhvort; 

(17) Liatris helleri - (Porter) Porter 
Heller's Blazing Star; 

(18) Lilaeopsis carolinensis — Coult. & Rose 
Carolina Lilaeopsis: 

(19) Lilium grayi -- Watson 
Gray's Lily: 

(20) Menyanthes trifoliata -- L. 
Buckbean: 

(21) Myriophyllum laxum — Schuttlew. ex Chapman 
Loose Watermilfoil; 

(22) Platanthera integra - (Nuttall) Gray ex Beck 
Yellow Fringeless Orchid: 

(23) Platanthera nivea -- (Nutt.) Luer 
Snowy Orchid: 

(24) Portulaca smallii — P. Wilson 
Small's Portulaca; 

(25) Rhexia aristosa — Britton 
Awned Meadow-beauty; 

(26) Ruellia humilis - Nutt. 
Low Wild-petunia; 

(27) Sabatia kennedyana -- Fern. 
Plymouth Gentian; 

(28) Schisandra glabra — (Briekel) Rehder 
Magnolia-vine; 

(29) Schlotheimia lancifolia -- Bartr. 
Highlands Moss; 

1 30 ) Senecio millefolium -- T. & G. 
Divided-leaf Ragwort; 

(31 ) Sporobolus teretifolius — Harper 
Wireleaf Dropseed: 

(32) Thelypteris simulata — (Davenp.) Xieuwl. 
Bog Fern; 

(33) Trichomanes boschianum -- Sturm ex Bosch 
Appalachian Filmy-fern; 

(34) Trichomanes petersii -- A. Gray 
Dwarf Filmy-fern; 

(35) Trillium discolor — Wray ex Hook. 
Mottled Trillium: 

(36) Utricularia olivacea -- Wright ex Grisebach 



( 



2223 



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NORTH CAROLINA REGISTER 



Januarx 15, 1993 



PROPOSED RULES 



Dwarf Bladderwort. 

Statutory Authority G.S. 106-202. 15. 

TITLE 7 - DEPARTMENT OF CULTURAL 
RESOURCES 

fSotice is hereby given in accordance with G.S. 
150B-21.2 that the Department of Cultural Re- 
sources intends to amend rule cited as 7 NCA C 4N 
.0102. 

1 he proposed effective date of this action is April 
1. 1993. 

Instructions on How to Demand a Public Hearing: 
Written request to Dr. William S. Price, Jr. , 
Director. Division of Archives and History, 109 E. 
Jones Street, Raleigh, NC 27601-2807. 

MXeason for Proposed Action: To stipulate that 
weaponry may be used in interpretive demonstra- 
tions at state historic sites. 

(comment Procedures: Written comments to Dr. 
William S. Price, Jr. , Director, Division of Ar- 
chives and History, 109 E. Jones Street, Raleigh, 
NC 27601-2807 by February 15. 1993. 

CHAPTER 4 - DIVISION OF 
ARCHIVES AND HISTORY 

SUBCHAPTER 4N - HISTORIC SITES 
REGULATIONS 

SECTION .0100 - HISTORIC SITES 

.0102 ACTIVITIES PROHIBITED ON 

STATE HISTORIC SITES PROPERTY 

(a) On state historic sites property, a person may 
not, unless specifically authorized to do so by 
written permit or work order from the Department 
of Cultural Resources: 

(1) remove, deface, or destroy any natural 
feature, plant, animal, mineral, or 
human-made object; 

(2) dig, plow, or otherwise disturb existing 
ground conditions; 

(3) drive or park a vehicle in places other 
than a designated public roadway or 
parking area; 



(4) allow an animal under his care to be 
unrestrained or to enter a site building 
or historic feature, unless that animal is 
a guide dog for a legally blind person; 

(5) ride or drive an animal in places other 
than a designated public roadway; 

(6) enter, leave, or remain on site property 
at any time other than normal hours of 
public visitation. The schedule for 
public visitation is posted at each site; 
variations from this schedule are an- 
nounced via print and broadcast media; 

(7) advertise, promote, offer for sale, or 
otherwise solicit for a product, service, 
candidate, charity, or public or private 
cause; 

(8) cross any railing, fence, barricade, or 
marked safety perimeter, or otherwise 
attempt to defeat the purpose of any 
security or safety device; 

(9) carry on his person any firearm, 
projectile-firing device, explosive or 
other weapon such weapons may be 
used in interpretive demonstrations at 
state historic sites jn accordance with 
"Regulations for Historic Weapons 
Demonstrations at State Historic Sites." 
Copies of the regulations are available 
from the Historic Sites Section ; 

(10) create a fire hazard by having any open 
flame or burning material inside any 
building unless the person is in a desig- 
nated smoking area, or by kindling fires 
in any place other than designated 
cooking grills; 

(11) disrupt the public enjoyment or normal 
operation of a state historic site by any 
form of commercial or for-profit activi- 
ty; 

(12) bathe, wade, or swim in any waters in 
any state historic site except at such 
times and in such places as the Depart- 
ment may designate as swimming areas. 
In this Rule, "swimming area" means 
any beach or water area designated by 
the Department as a place for swim- 
ming, wading, or bathing. 

(b) On state historic sites property, a person 
may not, under any circumstances: 

(1) create any pollution or environmental 
hazard by improper disposal of trash, 
garbage, waste water, or other detri- 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2224 



PROPOSED RULES 



mental substance; 

(2) hunt, fish, or otherwise disturb, injure, 
or destroy wildlife; 

(3) use or carry a metal detector, probe, or 
any similar instrument used for remote- 
ly sensing the presence of objects or 
features at or below ground level; 

(4) create a fire hazard by improperly 
discarding burning or smoldering mate- 
rial. 

Statutory Authority G.S. 121-4(8); 121-4(9); 
143B-62(2)d. 

TITLE 10 - DEPARTMENT OF HUMAN 
RESOURCES 

l\ otice is hereby given in accordance with G.S. 
150B-21.2 thai the Director of the Division of 
Mental Health, Developmental Disabilities and 
Substance Abuse Services intends to adopt and 
amend rules cited as 10 NCAC 14C .1115 and 10 
NCAC ISA .0605. 

1 he proposed effective date of this action is May 
3, 1993. 

1 he public hearing will be conducted at 9:00 
a.m. on February 16, 1993 at the Albemarle 
Building, 325 N. Salisbury Street, Room 1112 - 
11th Floor Conference Room, Raleigh, N.C. 
27603. 

Reason for Proposed Action; 
10 NCAC 14C .1115 - For residents who earn a 
relatively high level of monthly income, this 
change would allow the resident and the home to 
share in the costs of higher rent required by HUD, 
thus allowing them to remain in the home. Recent 
advances in vocational programming (supported 
employment) have resulted in many DD residents 
of HUD- financed group homes earning substantial- 
ly greater amounts of money and exceeding the 
HUD income criterial. HUD then requires a rent 
supplement. Homes typically have not had re- 
sources to pay the full amount of this supplement 
and were forced to restrict admissions or limit the 
residents ' vocational option. Tliis proposal would 
result in a sharing of fiscal responsibility for the 
rent supplement between the resident and the 
home, and thus make continuity of residential 
placement more feasible for both. This amendment 



is proposed to clarify the Rule with language 
consistent with that of the Federal regulations. 
10 NCAC ISA .0605 - Die proposed Rule will 
provide notice to the Director of an area program 
into which a client is either placed by another area 
program or by the Division. Such notification will 
not only facilitate continuity of care for the client, 
but will also provide notice so that the area pro- 
gram into which the client is placed might assess 
its responsibility for emergency/crisis intervention 
services or any other services which might require 
its resources. 

Comment Procedures: Any interested person may 
present his comments by oral presentation or by 
submitting a written statement to Charlotte Tucker, 
Division of Mental Health, Developmental Disabil- 
ities and Substance Abuse Services, 325 N. Salis- 
bury St., Raleigh, N.C. 27603. Persons wishing 
to make oral presentations should contact Char- 
lotte Tucker at the above address by February 15, 
1993. Time limits for oral remarks may be im- 
posed by the Division Director. Written comments 
must state the rules to which the comments are 
addressed and be received in this office by Febru- 
ary 15, 1993. Fiscal information on these Rules is 
available upon request. 

CHAPTER 14 - MENTAL HEALTH: 
GENERAL 

SUBCHAPTER 14C - GENERAL 
RULES 

SECTION .1100 - STATE AND FEDERAL 
FUNDS ADMINISTERED 

.1115 FUNDING GROUP HOMES 
FOR DEVELOPMENT ALLY 
DISABLED ADULTS 

(a) Pursuant to G.S. 122C-141, the Division 
shall administer a program of grants to area pro- 
grams to be called funds for group homes for 
developmentally disabled adults. 

(b) Such grants shall be used to support group 
homes for developmentally disabled adults. 

(c) Adults in whose behalf funds are adminis- 
tered to programs shall be: 

( 1 ) 18 years of age and older; and 

(2) residents of North Carolina. 

(d) To be eligible for funds for group homes for 
developmentally disabled adults, the community 
shall provide residents with a total array of servic- 
es and programs to meet their various needs and 



2225 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



levels of capability and not just 24-hour care. 
These programs shall promote a complete life for 
these individuals in a community setting. 

(e) Funds for group homes for developmentally 
disabled adults shall be administered to area 
programs as direct grants and do not require local 
matching. 

(f) Programs may spend funds for group homes 
for developmentally disabled adults for the follow- 
ing: 

(1) renting or leasing facilities; 

(2) furniture or specialized equipment for 
residents; 

(3) transportation of residents; 

(4) other necessary operating expenses as 
approved by the Division; and 

(5) the purchase, construction or alteration, 
improvement or repair of a facility by 
the area program or a non-profit board 
with division approval with the excep- 
tion of programs participating in federal 
Department of Housing and Urban 
Development (HUD) Section 202 pro- 
jects which shall follow the require- 
ments specified in (f)(6) of this Rule. 
The program shall meet the following 
requirements: 

(A) The Group Home Mortgage Payment 
Program. The Division may partici- 
pate in the mortgage payment pro- 
gram contingent upon the availability 
of State funds. 

(B) The Group Home Pur- 
chase/Construction Program. 

(i) The Division may participate in 
the down payment or lump sum 
purchase or construction of a 
group home in whole or part 
contingent upon the availability of 
State funds. 

(ii) The area program or non-profit 
board shall secure two property 
appraisals for review and approval 
by the Division prior to purchase. 

(iii) If a new construction grant is 
requested, the area program shall 
submit two construction bid con- 
tracts from two building contrac- 
tors to the appropriate regional 
office for review and approval 
prior to construction bid letting. 

(C) A request for initial renovation of a 
newly acquired facility of five thou- 
sand dollars ($5,000) or less shall be 
submitted to the appropriate regional 



office of the Division for approval. 
Initial minor repairs to facilities of 
less than one thousand dollars 
($1,000) shall be approved by the 
area program. 

(D) A request for alteration or improve- 
ment of an existing facility in excess 
of five thousand dollars ($5,000) shall 
be forwarded to the Division 
Director's office through the appropri- 
ate regional office of the Division for 
approval. 

(E) Each request as outlined in Parts 
(f)(5)(B). (C) and (D) of this Rule 
shall be accompanied by a narrative 
that explains the need for the pur- 
chase, construction or alteration, 
improvement or repair of the facility 
and a copy of the schematic drawings 
and specifications. If approved by the 
Division of Mental Health, Develop- 
mental Disabilities and Substance 
Abuse Services, these drawings and 
specifications shall be forwarded to 
the Division of Facility Services for 
review and approval. 

(F) If the group home is operated by a 
non-profit board, the area program 
shall sign a contract with the private 
non-profit agency for either the mort- 
gage payments to be made or the 
purchase or construction program as 
indicated in (A) and (B) of (f)(5) of 
this Rule. A copy of the appropriate 
contract shall be obtained from the 
controller's office of the central office 
of the Division. 

(G) If a facility owned by an area pro- 
gram or its private non-profit contract 
agency was purchased, altered, im- 
proved, or rehabilitated using division 
funds and later ceases to be used in 
the delivery of services to clients, the 
facility may be sold at the current fair 
market value or retained, and the area 
program or its private non-profit 
contract agency shall reimburse the 
Division according to the following 
requirements: 

(i) The current fair market value, 
acceptable to the Division, shall 
be determined by two independent 
appraisals submitted and used as 
guidance. 

(ii) Reimbursement shall be a pro rata 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2226 



PROPOSED RULES 



share of the accepted value, based 
on the contribution made by the 
Division in the purchase, con- 
struction or alteration, improve- 
ment or repair of the facility, 
(iii) The area program shall maintain a 
record which reflects the amount 
of contribution made by the State 
for purchase, construction or 
alteration, improvement or repair 
to the facility; 
(6) to participate in a federal Department of 
Housing and Urban Development 
(HUD) Section 202 project (12 U.S.C. 
§ 1 70 1 q ) for the purchase, construction 
or alteration, improvement or repair of 
a group home with division approval. 
The program shall meet the following 
requirements: 

(A) The area program may request funds 
for this project from the Division. 
The Division may participate in the 
HUD Section 202 project contingent 
upon the availability of State funds. 

(B) The area program shall sign a con- 
tract with a private non-profit agency 
to specif)' that if the group home 
ceases to be used in the delivery of 
services to the clients, the facility may 
be sold at the current fair market 
value or retained, and the private 
non-profit agency shall reimburse the 
Division according to the following 
requirements: 

(i) The current fair market value, 
acceptable to the Division, shall 
be determined by two independent 
appraisals submitted and used as 
guidance. 

(ii) Reimbursement shall be a pro rata 
share of the accepted value, based 
on the contribution made by the 
Division in the purchase, con- 
struction or alteration, improve- 
ment or repair of the facility. 

(C) The area program shall maintain a 
record which reflects the amount of 
contribution made by the State for 
purchase, construction or alteration, 
improvement or repair to the group 
home. 

(g) Fund Balance. 
( 1 ) The Division may allow group homes 
for developmentally disabled adults to 
maintain a fund balance of no more 



than 15 percent of the current annual 
budget for the group home. 

(2) The 15 percent fund balance shall be 
generated entirely by non-State funds. 

(3) The Division may decrease State appro- 
priation to a group home, thereby 
necessitating the group home to utilize 
its fund balance, if the State appropria- 
tion is required in order to continue 
operations at another home. 

(4) The 15 percent fund balance allowed 
shall be in addition to the amount the 
Division would allow to remain in the 
fund balance due to restricted dona- 
tions. 

(5) Except for the restricted donations and 
the 15 percent fund balance, funds for 
group homes for developmentally dis- 
abled adults shall be expended last. 

(6) An allowance for a fund balance for 
group homes that are operated by an 
area program is made in Rule . 1 125 of 
this Section. 

(h) To apply for funds for group homes for 
developmentally disabled adults, an annual plan 
and budget for such funds shall be included in the 
appropriate area program's total annual plan and 
budget package when it is submitted to the appro- 
priate regional office of the Division. 

(i) Funds for group homes for developmentally 
disabled adults shall be allocated among the re- 
gions of the Division by the Division Director. 

(j) Based on the approved annual plan and 
budget request submitted and availability of funds, 
allocation of funds for group homes for develop- 
mentally disabled adults to area programs within 
each region shall be made by the Division Director 
or his designee. 

(k) The monthly rent for clients residing in 
HI D-financed group homes is determined accord- 
ing to the criteria set forth in HI D Handbook 
4350.3. "Occupancy Requirements of Subsidized 
Multi-Family Housing Programs" (which may be 
obtained from the Department of Housing and 
Urban Development. 2306 West Meadowview 
Road. Greensboro. N. C. 2470 1 ) and hereby- 
adopted by reference, including any subsequent 
amendments and editions. Should the rent for 
these residents exceed one hundred and fifty 
dollars (Si 50) per month, a room and board rate 
higher than the established maximum rate, in 
accordance with the provisions of J_0 NCAC 47 A 
.0201. shall be charged. The full rent shaH be 
payable to the project owner of the home. Re- 
sponsibilities and formula for payment of this 



2227 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



amount are as follows: 

(1) The area program or private non-profit 
agency operating the home shall pay 
out of its operating budget, the first one 
hundred and fifty dollars ($150) of the 
HUD-determined rent and 20% of any 
amount that exceeds the one hundred 
and fifty dollars ($150). 

(2) The remaining 80% of the amount that 
exceeds the one hundred and fifty dol- 
lars ($150) shall be paid by the resident 
or any other party who assumes respon- 
sibility. 

Clienta residing in HUD financed group homes, 
whose monthly income exceeds the HUD income 
criteria set forth in the HUD Handbook 33.50 
"OCCUPANCY REQUIREMENTS OF SUBS1 
D1ZED — MULT1 FAMILY — HOUSING — P-RO- 
CiRAMS" and hereby adopted by reference includ 
ing any subsequent amendments and edition s , s hall 
be charged a room and board rate higher than the 
e s tabli s hed maximum rate in accordance with the 
provisions of 10 NCAC 4 7A .0201. — For such 
residents, the excess rate shall be payable to HUD. 
Responsibilities and formula for payment of this 
excess amount are as follow s : 

i+) The area program or private non profit 

agency operating the home shall pay an 
amount — rt»t — te — exceed — the — f+rst — efie 
hundred fifty dollars ($150.00) of the 
e xce ss amount above the HUD allow 
able maximum rate, and 20 percent of 
any amount that exceed s the one hun 
drcd fifty dollar s ($150.00). 

f2-) The remaining 80 percent of the exce ss 

amount that exceed s the one hundred 
fifty dollar s ($150.00) shall cither be 
paid by the re s ident or any other party 
who assumes the responsibility. 



Statutory Authority G.S. 122C-1 12(a)(6), (11); 
122C-141; 122C-147. 

CHAPTER 18 - MENTAL HEALTH: 
OTHER PROGRAMS 

SUBCHAPTER 18A - MONITORING 
PROCEDURES 

SECTION .0600 - COMMUNITY 
RELATIONS 

.0605 NOTIFICATION PROCEDURES 
FOR PROVISION OF SERVICES 

(a) If an area program plans to operate or 



contract for a service located within the catchment 
area of another area program, the Director of the 
area program that plans to operate or contract for 
the service shall notify the Director of flie area 
program in which the service is to be located prior 
to the provision of the service. 

(b) The notification shall be |n writing and shall 
include the following: 

(1) name of the provider: 

(2) service to be provided; and 

(3) anticipated dates of service. 

In the event of an emergency, notification prior to 
the provision of service may be by telephone with 
written notification occurring the next working 
day. 

(c) Should a dispute resolution concerning such 
service as described in Paragraph (a) of this Rule 
be necessary, the Division Director shall arbitrate 
an agreement between the respective area pro- 
grams. 

(d) If the Division plans to operate or contract 
for a service in an area program, the Division 
Director shall notify the Director of the area 
program in which the service js to be located, 
prior to the provision of the service, according to 
the procedures set forth in Paragraph (b) of this 
Rule. 

Statutory Authority G.S. 122C-113. 



1\ otice is hereby given in accordance with G.S. 
150B-2I.2 that the DHR/Division of Medical 
Assistance intends to amend rules cited as 10 
NCAC 50B .0201 - .0203. .0301. .0306. .0308. 
.0313. .0403 and .0406. 

1 he proposed effective date of this action is April 
1. 1993. 

1 he public hearing will be conducted at 1:30 
p.m. on February 16, 1993 at the North Carolina 
Division of Medical Assistance. 1985 Umstead 
Drive, Room 132. Raleigh, NC 27603. 

MYeason for Proposed Action: Amendment neces- 
sary to include application processing requirements 
and verification requirements in effect since August 
1, 1992. 



c 



muncnt Procedures: Written comments con- 



7:20 



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January 15, 1993 



2228 



PROPOSED RULES 



cerning this amendment must be submitted by 
February 15, 1993 to: Division of Medical Assis- 
tance, 1985 Umstead Drive, Raleigh, NC 27603 
ATTN: Clarence Ervin, APA Coordinator. Oral 
comments may be presented at the hearing. In 
addition, a fiscal impact statement is available 
upon request (written) from the same address. 

CHAPTER 50 - MEDICAL ASSISTANCE 

SUBCHAPTER 50B - ELIGIBILITY 
DETERMINATION 

SECTION .0200 - APPLICATION PROCESS 

.0201 ACCEPTANCE OF APPLICATION 

(a) A client shall be allowed to apply without 
delay. Without delay is the same day the client 
appears at the county department of social services 
expressing a financial or medical need. 

(b) The county department of social services 
shall not act to discourage any individual from 
applying for Medicaid. It shall be considered 
discouragement if any employee of the county 
department of social services: 

(1) requires or suggests the individual wait 
to apply until he applies for other bene- 
fits or until an application for other 
benefits has been approved or denied; 
or 

(2) incorrectly states or suggests the indi- 
vidual is not eligible for Medicaid; or 

(3) gives incorrect or incomplete informa- 
tion about Medicaid programs; or 

(4) requires the individual provide or ob- 
tain any information needed to establish 
eligibility prior to signing an applica- 
tion; or 

(5) any other fact which proves to the 
satisfaction of the county agency or a 
hearing officer that the client was dis- 
couraged from applying. 

(c) The client shall be informed verbally and in 
writing, that; 

(1) he can apply without delay. 

(2) a decision shall be made concerning his 
eligibility within 45 calendar days from 
the date of application for Medicaid, 
except for M-AD . unle s s he or a collat 
oral cau s e s the de l ay . For M-AD the 
application processing standard shall be 
60 calendar days from the date of appli- 
cation. For applications which do not 
require a disability determination and 
90 calendar days for applications which 



require a disability determination; or 
(3) he shall receive a written decision 
concerning his eligibility. 

(d) The client shall apply in his county of 
residence. 

(e) The date of the application shall be the date 
the client or his representative signs the state 
prescribed application form at the county depart- 
ment of social services in his county of residence 
under penalty of perjury or the date the signed 
application is received by mail at the department of 
social services In his county of residence . 

(f) If an individual requests assistance by mail, 
the letter shall be considered a request for informa- 
tion. Within three workdays following receipt of 
the request, the county agency shall mail follow-up 
information to the individual. The county agency 
shall advise the individual to come to the agency to 
apply and be interviewed, or if he is unable to 
come in person, to contact the agency so other 
arrangements can be made to take his application. 

(g) If an individual requests assistance by tele- 
phone, he shall be advised to come to the county 
agency to sign an application and be interviewed; 
or, if he is unable to come to the agency in person 
other arrangements shall be made to take his 
application. 

Authority G.S. 108-43: 108A-54: 42 C.F.R. 
435.906: 42 C.F.R. 435.907: 42 C.F.R. 435.911: 
Alexander v. Flaherty, U.S.D.C, W.D.N. C, File 
No. C-C-74-183, Consent Order fled 15 December 
1989: Alexander v. Flaherty Consent Order filed 
February 14, 1992. 

.0202 INITIAL INTERVIEW 

(a) The county department of social services 
shall conduct an interview with the client or his 
representative. The client may have any person or 
persons of his choice participate in the interview. 
During the interview, the Income Maintenance 
Caseworker shall explain the application process, 
the client's rights and responsibilities, the pro- 
grams of public assistance and the eligibility 
conditions. 

(b) The client applicant shall be advised of his 
right to choo s e among the programs apply in more 
than one program category for which he qualifies 
and the advantages and disadvantages of the 
choices shall be explained. 

(c) The client shall be informed of the follow- 
ing: 

( 1 ) That information he provides shall be 
checked for accuracy. The client shall 
be told what information he shall pro- 



2229 



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January 15, 1993 



PROPOSED RULES 



vide, and what sources the agency shall 
contact to check the information. Col- 
lateral sources of information shall 
include knowledgeable individuals, 
business organizations, public records, 
and documentary evidence. If the 
client does not wish necessary collateral 
contacts to be made, he can withdraw 
his application. If he denies permission 
to contact necessary collaterals and all 
alternative sources of verification, the 
application shall be denied due to fail- 
ure to cooperate in establishing eligibil- 
ity. 

(2) The client has the right to: 

(A) Receive assistance if found eligible; 

(B) Be protected against discrimination on 
the grounds of race, creed, or national 
origin by Title VI of the Civil Rights 
Act of 1964. He may appeal such 
discrimination; 

(C) If eligible for Medicaid and Medicare 
Part B, have the monthly premium 
paid in his behalf under an agreement 
between the state and SSA; 

(D) Have any information given to the 
agency kept in confidence; 

(E) Appeal, if he believes the agency's 
action to deny, change, or terminate 
assistance is incorrect, or his request 
is not acted on with reasonable 
promptness; 

(F) Reapply at any time, if found ineligi- 
ble; 

(G) Withdraw from the program at any 
time; 

(H) Request the agency's help in obtaining 

third party information which he is 

responsible to provide; 
(I) Be informed of all alternative sources 

of verification for the information he 

is responsible to provide. 

(3) The client shall be responsible for the 
following: 

(A) Provide the county department, state 
and federal officials, the necessary 
sources from which to locate and 
obtain information needed to deter- 
mine eligibility; 

(B) Report to the county department of 
social services any change in situation 
that may affect eligibility within five 
days after it happens. The meaning 
of fraud shall be explained. The 
applicant shall be informed that he 



may be suspected of fraud if he fails 
to report a change in situation and 
that in such situations, he may have to 
repay assistance received in error and 
that he may also be tried by the courts 
for fraud; 

(C) Inform the county department of 
social services of any persons or 
organization against whom he has a 
right to recovery. When he accepts 
medical assistance, the applicant 
assigns his rights to third party insur- 
ance benefits to the state. He shall be 
informed that it is a misdemeanor to 
fail to disclose the identity of any 
person or organization against whom 
he has a right to recovery; 

(D) Immediately report to the county 
department the receipt of an I.D. card 
which he knows to be erroneous. If 
he does not report such and uses the 
I.D. card, he may be required to 
repay any medical expenses paid in 
error. 

Authority G.S. 108A-57; 42 C.F.R. 435.908; 
Alexander v. Flaherty, U.S.D.C. W.D.N. C. . File 
No. C-C-74-183, Consent Order Filed 15 Decem- 
ber 1989; Alexander v. Flaherty Consent Order 
filed February 14, 1992. 

.0203 APPLICATION PROCESSING 
STANDARDS 

(a) The county department of social services 
shall comply with the following standards in 
processing applications: 

(1) Request the client provide Only require 
information or verification necessary to 
establish eligibility for assistance ; 

(2) Reque s t all information known to be 
needed within 20 calendar days from 
the date of application or within five 
work days of the date the need for new 
information — h — known, — whichever — h 
later; Make at least two easily under- 
standable requests for all necessary 
information from the applicant or third 
party; 

(3) Inform the client in writing, and verbal 
ly when po ss ible, of acceptable alterna 
tive sources or forms of verification; 
Allow at least 10 calendar days between 
the initial request and a follow-up re- 
quest and at least 10 calendar days 
between the follow-up request and 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2230 



PROPOSED RULES 



denial of the application; 

(4) Inform the client in writing, and verbal- 
ly when possible, of the right to request 
help in obtaining information requested 
from the client. The county department 
of social services shall not discourage 
any client from requesting such help; 

( 5 ) Reque s t — am* — information — needed — to 
determine disability on the date of the 
initial — interview — and — forward — s uch 
information to the Di s ability Determine! 
tion Section within five work day s of 
receipt; An ap plication may pend 6 
months for verification that the deduct- 
ible has been met or disability estab- 
lished. 

{&) Conduct at least one follow up contact 

with the client and third party s ources 
to obtain requested information by the 
processing time s tandard; 

< J ! L ) Reque s t medical bills needed to meet n 

deductible within five work day s of the 
date income is verified and the client i s 
found to have a deductible; 



m- 



-Gm 



Mitplete all applications which pend 
beyond the proce ss ing time standard 
within five work days of receiving the 
last needed information. 
(b) Except as provided in Subparagraphs ( 1 ) 
through (8) of this Paragraph, the county depart- 
ment of social services s hall cla ss ify all applica 
tions whieh are not completed by the time stan 
dard s in Rule .0201 of this Section a s overdue 



with good cau s e or overdue without good cau se . 
To clas s ify the application as overdue with good 
cau s e, the county department of social s ervic es 
shall have ease record documentation to establi s h 
it complied with all application proce ss ing stan 
dard s for the information s till needed to complet e 
the application, shall accept the applicant's state- 
ment as verification for all factors of eligibility 
that have not otherwise been verified when the 
application is processed: 

( 1 ) Any medical verification; 

(2) Proof a deductible has been met; 

(3) Legal alien status; 

(4) Proof of rebuttal value for motor vehi- 
cles, salabilitv of remainder interest, 
and transfer of assets; 

(5) Proof of designation of liquid assets for 
burial; 

(6) Proof of legally binding agreement 
limiting resource availability; 

(7) Proof of valid social security number or 
application for a social security num- 



ber; 

(8) Reserve for adult applicants if the stated 
reserve exceeds one thousand two 
hundred dollars ($1,200) and the appli- 
cant has taken no steps to obtain the 
missing reserve verification; 

(9) Any information which the applicant 
does not know and for which the appli- 
cant cannot give a reasonable verifica- 
tion. 

(c) The county department of social services 
s hall mail written notice to the client on the pro 
cessing deadline if the application has not been 
comp l eted. — The notice s hall advise the client of 
the rea s on or reasons for the delay and what 
information — is — sttH — needed, is responsible for 
verification of an item of information when: 



ill 

(21 
£3) 

(4) 

(5) 



A fee must be paid to obtain the verifi- 
cation; 
It is available within the agency; 



The applicant or any assistant unit 
member must be enumerated; 



The applicant requests assistance; 
The applicant is blind, deaf, mentally ill 
or retarded, unable to speak English- 
unable to read and write, housebound, 
hospitalized, institutionalized, or clearly 
unable to obtain the requested verifica- 
tion. 



Authority G.S. 108A-54; 42 C.F.R. 435.911; 
Alexander v. Flaherty. V.S.D.C. W.D.N. C. . File 
No. C-C-74-183, Consent Order Filed 15 Decem- 
ber 1989; Alexander v. Flaherty Consent Order 
filed February 14. 1992. 

.0206 DISPOSITION 

(a) Disposition of the application shall complete 
the application process and shall consist of one of 
the following actions: 

( 1 ) Approval of assistance; or 

(2) Denial of assistance; or 

(3) Denial of assistance for ineligible 
month or months of the certification 
period and approval for eligible month 
or months of the certification period; or 

(4) Voluntary withdrawal of the application 
by the client. The Income Maintenance 
Caseworker shall not suggest to the 
client that he withdraw his application 
and shall explain alternatives to with- 
drawal. The Income Maintenance 
Caseworker shall explain the client's 
right to reapply at anytime. 

(b) The county department of social services 



2231 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



shall not deny an application prior to three months 
from the date of application solely duo to the 
client's failure to provide reque s ted information. 
With the exception of the information li s ted in (b) 

t-H (5) of thi s Rule, the county agency shall 

never deny an application s olely due to the failure 
of a third party source to provide — information 

reque s ted by the agency. The client s hall be 

offered the opportunity to provide a declaration in 
lieu of a third party verification for missing infor- 
mation except in the following instances: 

(1) To e s tabli s h di s ability or incapacity ft is 
established the applicant will not be 
able to meet the deductible ; or 

(2) To establish — medical bill s to meet a 
deductible; or The applicant cannot be 
located ; or 

(3) To verify alien s tatu s On or after the 
45th day propose denial with a 30 day 
suspense period before denial becomes 
final when the applicant has no contact 
with the agency, provides no informa- 
tion and has not requested help. 

{4) To comply with Social Security enu 

meration; or 
f§-) To e s tabli s h proof of rebutted value of 

a re s ource or existence of a legally 

binding — agreement — affecting — re s ource 

ownership. 

Authority- G.S. 108A-54: 42 C.F.R. 435.912; 42 
C.F.R. 435.913; Alexander v. Flaherty, U.S.D.C, 
W.D.N. C. File No. C-C-74-1S3. Consent Order 
filed 15 December 1989. 

SECTION .0300 - CONDITIONS FOR 
ELIGIBILITY 

.0301 AGE 

(a) Pregnant women and caretaker relatives shall 
have no age requirement to be eligible for Medic- 
aid. 

(b) Other individuals shall meet one of the 
following age requirements to qualify for Medic- 
aid: 

( 1 ) Age 65 and above as an aged individu- 
al; or 

(2) Under age 65 as a disabled individual; 
or 

(3) Under age 21 . 

(c) The client's age shall be verified by viewing 
documentary evidence. If documentary evidence 
ha s not been obtained by the end of the application 
proce ss ing time s tandard, the client' s age s hall be 
pre s umed to be the age he has alleged unle s s oth e r 



documentation conflict s . — The county agency s hall 
continue efforts to obtain documentary evidence. 

(c) f^The anniversary of birth shall be the 
method for determining when an age is reached. 

(d) {e) July 1 shall be the date of birth when the 
year, but not the date of birth is known. 

Authority G.S. 108A-54; 42 C.F.R. 435.520; 
Alexander v. Flaherty- Consent Order filed Febru- 
ary- 14, 1992. 

.0306 DISABILITY 

(a) Individuals eligible for Medicaid in Decem- 
ber 1973 as disabled individuals and who meet 
conditions required by 42 CFR 435.133 shall be 
permanently and totally disabled based on a physi- 
cal or mental impairment which substantially 
precludes him from obtaining gainful employment, 
and such impairment appears reasonably certain to 
continue without substantial improvement through- 
out his life time. 

(b) Any client who has applied for Medicaid 
since January 1. 1974 on the basis of disability 
shall be found disabled under the definition of 
disability and procedures established for evaluation 
of vocational and medical factors under the supple- 
mental security income program. 

fe-) — A client shall be re s pon s ible for providing a 
medical report to establish disability if he has a 
current treating s ource. — If the client does not have 
a current treating source, the Income Maintenance 



^ 



a s eworkor s hall have the client sign a con s ent 
form and Disability Determination section s hall 
obtain medical information. 

(e) fd)A social history on a form prescribed by 
the state shall be completed by the Income Mainte- 
nance Caseworker and submitted to the Disability 
Determination Section with the request for disabili- 
ty determination. 

(d) fe)Except for client's receiving social securi- 
ty or supplemental security income on the basis of 
disability, the decision on disability is made by the 
Disability Determination Section of the Division of 
Social Services. 

(e) (f)Social Security Administration (SSA) 
decisions made for social security disability or 
supplemental security income shall be adopted for 
persons applying for Medicaid. 

(f) fg-)Disability determination shall be verified 
from the client's award letter. SDX. BENDEX. 
Disability Determination Section approval. Admin- 
istrative Law Judge decision or other documentary 
evidence. 

(g) fh-)Disability for purposes of Medicaid 
eligibility shall cease when the client is determined 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2232 



PROPOSED RULES 



by the Social Security Administration or the 
Disability Determination Section to be capable of 
engaging in substantial gainful activity. The client 
may appeal the termination of Medicaid based on 
his disability cessation. 

Authority G.S. 108A-54; 42 C.F.R. 435.540; 42 
C.F.R. 435.541; Alexander v. Flaherty Consent 
Order filed February 14. 1992. 

.0308 CARETAKER RELATIVE 

(a) To qualify for Medicaid as a caretaker 
relative the individual shall be the natural or 
adoptive parent or the specified relative living in 
the household with the child if the caretaker is: 

( 1 ) Pregnant with no other dependent chil- 
dren in her care, or 

(2) Related to an eligible child, who is 
deprived as described in Rule .0305 of 
this Subchapter, and 

(3) Provide day to day care and supervision 
for the child. 



fb-t — verification of relationship to the eligible 
child is e s tabli s hed by Rule .030 4 of this Section. 

(b) fe-)Pregnancy shall be medically verified and 
the length of pregnancy and expected delivery date 
indicated on the medical statement. 

Authority G.S. 108A-54; 42 C.F.R. 435.310. 

.0313 INCOME 

(a) Income from the following sources shall be 
counted in the calculation of financial eligibility: 
(1) Unearned. 

(A) RSD1. 

(B) Veteran's Administration. 

(C) Railroad Retirement. 

(Di Pensions or retirement benefits. 

(E) Workmen's Compensation. 

(F) Unemployment Compensation. 

(G) Support Payments. 
(Hi Contributions, 

(I) Dividends or interest from stocks, 
bonds, and other investments. 

(J) Trust fund income. 

(K) Private disability or employment 
compensation. 

(L) That portion of educational loans, 
grants, and scholarships for mainte- 
nance. 

(M) Work release. 

(N) Lump sum payments. 

(O) Military allotments. 

(P) Brown Lung Benefits. 

(Q) Black Lung Benefits, 



(R) Trade Adjustment benefits. 

(S) SSI when the client is in long term 
care. 

(T) VA Aid and Attendance when the 
client is in long term care, 

(U) Foster Care Board payments in excess 
of state maximum rates for M-AF 
clients who serve as foster parents, 

(V) Income allocated from an institutional- 
ized spouse to the client who is the 
community spouse as stated in 42 
U.S.C. I396r-5(d), 

(W) Income allowed from an institutional- 
ized spouse to the client who is a 
dependent family member as stated in 
42 U.S.C. 1396r-5(d). 

(X) Sheltered Workshop Income. 

(Y) Loans if repayment of a loan and not 
counted in reserve. 

(Z) Income deemed to Family and 
Children's clients. 

(2) Earned Income. 

(A) Income from wages, salaries, and 

commissions, 
(Bi Farm Income. 

(C) Small business income including 
self-employment. 

(D) Rental income. 

(E) Income from roomers and boarders. 

(F) Earned income of a child client who 
is a part-time student and a full-time 
employee, 

(G) Supplemental payments in excess of 
state maximum rates for Foster Care 
Board payments paid by the county to 
Family and Children's clients who 
serve as foster parents, 

(H) Earned income tax credits for the 
Aged, Blind or Disabled only. 

(I) VA Aid and Attendance paid to a 
budget unit member who provides the 
aid and attendance. 

(3) Additional sources of income not listed 
in (1) or (2) of this Rule will be consid- 
ered available unless specifically ex- 
cluded by (b) of this Rule, or by regu- 
lation or law. 

(b) Income from the following sources shall not 
be counted in the calculation of financial eligibili- 
ty: 

( 1 i Earned income of a child who is a 
part-time student but is not a full-time 
employee; 
(2) Earned income of a child who is a 
full-time student; 



2233 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



(3) Incentive payments and training allow- 
ances made to WIN training partici- 
pants; 

(4) Payments for supportive services or 
reimbursement of out-of-pocket expens- 
es made to volunteers serving as VIS- 
TA volunteers, foster grandparents, 
senior health aides, senior companions, 
Service Corps of Retired Executives, 
Active Corps of Executives, Retired 
Senior Volunteer Programs, Action 
Cooperative Volunteer Program, Uni- 
versity Year for Action Program, and 
other programs under Titles I, II, and 
III of Public Law 93-113; 

(5) Foster Care Board payments equal to or 
below the state maximum rates for 
Family and Children's clients who 
serve as foster parents; 

(6) Earnings of M-AABD clients who are 
participating in ADAP (Adult Develop- 
mental Activity Program) training 
programs for a specified period; 

(7) Income that is unpredictable, i.e., 
unplanned and arising only from time to 
time. Examples include occasional 
yard work, sporadic babysitting, etc.; 

(8) Relocation payments; 

(9) Value of the coupon allotment under 
the Food Stamp Program; 

(10) Food (vegetables, dairy products, and 
meat) grown by or given to a member 
of the household. If home grown pro- 
duce is sold, count as earned income; 

(11) Benefits received from the Nutrition 
Program for the Elderly; 

(12) Food Assistance under the Child Nutri- 
tion Act and National School Lunch 
Act; 

(13) Assistance provided in cash or in kind 
under any governmental, civic, or 
charitable organization whose purpose 
is to provide social services or voca- 
tional rehabilitation. This includes 
V.R. incentive payments for training, 
education and allowance for depen- 
dents, grants for tuition, chore services 
under Title XX of the Social Security 
Act, VA aid and attendance or aid to 
the home bound if the individual is in a 
private living arrangement; 

(14) Loans or grants such as the GI Bill, 
civic, honorary and fraternal club 
scholarships, loans, or scholarships 
granted from private donations to the 



college, etc., except for any portion 
used or designated for maintenance; 

(15) Loans, grants, or scholarships to under- 
graduates for educational purposes 
made or insured under any program 
administered by the U.S. Department of 
Education; 

(16) Benefits received under Title VII of the 
Older Americans Act of 1965; 

(17) Payments received under the Experi- 
mental Housing Allowance Program 
(EHAP); 

(18) In-kind shelter and utility contributions 
paid directly to the supplier. For Fami- 
ly and Children's cases, shelter, utili- 
ties, or household furnishings made 
available to the client at no cost; 

(19) Food/clothing contributions in Family 
and Children's cases (except for food 
allowance for persons temporarily 
absent in medical facilities up to 12 
months); 

(20) Income of a child under 21 in the bud- 
get unit who is participating in JTPA 
and is receiving as a child; 

(21) Housing Improvement Grants approved 
by the N.C. Commission of Indian 
Affairs or funds distributed per capital 
or held in trust for Indian tribe mem- 
bers under P. L. 92-254, P.L. 93-134 or 
P.L. 94-540; 

(22) Payments to Indian tribe members as 
permitted under P.L. 94-1 14; 

(23) Payments made by Medicare to a home 
renal dialysis patient as medical bene- 
fits; 

(24) SSI except for individuals in long term 
care; 

(25) HUD Section 8 benefits when paid 
directly to the supplier or jointly to the 
supplier and client; 

(26) Benefits received by a client who is a 
representative payee for another indi- 
vidual who is incompetent or incapable 
of handling his affairs. Such benefits 
must be accounted for separate from the 
payee's own income and resources; 

(27) Special one time payments such as 
energy, weatherization assistance, or 
disaster assistance that is not designated 
as medical; 

(28) The value of the U.S. Department of 
Agriculture donated foods (surplus 
commodities); 

(29) Payments under the Alaska Native 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2234 



PROPOSED RULES 



Claims Settlement Act. Public Lav, 
92-203: 

(30) Any payment received under Title II of 
the Uniform Relocation Assistance and 
Real Property Acquisition Policies Act 
of 1970; 

(31 i HID Community Development Block 
Grant funds received to finance the 
renovation of a privately owned resi- 
dence; 

(32) Reimbursement for transportation ex- 
penses incurred as a result of participa- 
tion in the Community Work Experi- 
ence Program or for use of client's own 
vehicle to obtain medical care or treat- 
ment; 

(33) Adoption assistance; 

(34) Incentive payments made to a client 
participating in a vocational rehabilita- 
tion program; 

(35) Title XX funds received to pay for 
services rendered by another individual 
or agency; 

(36) Any amount received as a refund of 
taxes paid: 

(A) For M-AABD categorically needy 
clients who meet the criteria in (B) 
below, the amount of increase in 
RSDI resulting from elimination of 
the actuarial reduction factor in calcu- 
lating the amount of RSDI they re- 
ceived in January 1984 plus the 
amount of all subsequent RSDI 
cost-of-living increases. This income 
ceases to be counted up to three 
months prior to the date the individual 
applies to have it not counted, provid- 
ed he meets the criteria in (B) below. 

(B) For the RSDI increases specified in 
(A) above not to be counted, the 
client must; 

(i) Have lost SSI eligibility effective 
January 1984 due to an RSDI 
increase caused by elimination of 
the actuarial reduction factor, 

(ii) Would currently be eligible for 
SSI if the increase in RSDI speci- 
fied in (i) and all subsequent 
RSDI cost-of-living increases 
were deducted, and 

(iii) No later than June 30. 1987. have 
applied to have these increases not 
counted, 
fe-) — Verification of the receipt and amount of the 
income shall be made through documentary evi 



denco provided by the client or from the source of 
the income. 

(c) fd^Income levels for purposes of establishing 
financial eligibility are those amounts approved by 
the N.C. General Assembly and stated in the 
Appropriations Act for categorically needy and 
medically needy classifications, except for the 
following: 

(1) The income level shall be reduced by 
one-third when an aged, blind or dis- 
abled individual lives in the household 
of another person and does not pay his 
proportionate share of household ex- 
penses. The one-third reduction shall 
not apply to children under nineteen 
years of age who live in the home of 
their parents; 

(2) An individual living in a long term care 
facility or other medical institution shall 
be allowed a thirty dollar (S30.00) 
income level, and a couple in the same 
room in a long term care facility shall 
be allowed a sixty dollar ($60.00) 
income level; 

(3) Individuals who are in a long term care 
facility for a temporary period of six 
months or less shall be allowed the 
income level provided by statute in 
addition to the thirty dollar ($30.00) 
level. 

Authority G.S. W8A-25(b); 108A-61; 42 C.F.R. 
435. 135: 42 C.F.R. 435. 731; 42 C.F.R. 435. 732: 
42 C. F. R. 435. 733; 42 C. F. R. 435. SJ 1 ; 42 C. F. R. 
435.812; 42 C.F.R. 435.831: 42 C.F.R. 435.832: 
42 C.F.R. 435.1007; 45 C.F.R. 233.20: P.L. 
99-272; Section 12202; Alexander v. Flaherty 
Consent Order filed February 14. 1992; 42 U.S.C. 
1383c(b);42 U.S.C. 1383(c)(d). 

SECTION .0400 - BUDGETING 
PRINCIPALS 

.0403 RESERVE 

(a) The value of resources held by the client or 
by a financially responsible person shall be consid- 
ered available to the client in determining count- 
able reserve for the budget unit. 

(b) Jointly owned resources shall be counted as 
follows: 

( 1 ) The value of resources owned jointly 
with a non-financially responsible per- 
son who is a recipient of another public 
assistance budget unit shall be divided 
equally between the budget units: 



2235 



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January 15, 1993 



PROPOSED RULES 



(2) The value of liquid assets and personal 
property owned jointly with a 
non-financially responsible person who 
is not a client of another public assis- 
tance budget unit shall be available to 
the budget unit member if he can dis- 
pose of the resource without the consent 
and participation of the other owner or 
the other owner consents to and. if 
necessary, participates in the disposal of 
the resource; 

(3) The client's share of the value of real 
property owned jointly with a 
non-financially responsible person who 
is not a member of another public 
assistance budget unit shall be available 
to the budget unit member if he can 
dispose of his share of the resource 
without the consent and participation of 
the other owner or the other owner 
consents to and, if necessary, partici- 
pates in the disposal of the resource. 

(c) The terms of a separation agreement, divorce 
decree, will, deed or other legally binding agree- 
ment or legally binding order shall take precedence 
over ownership of resources as stated in (a) and 
(b) of this Rule. 

(d) The reserve limit for the budget unit for 
aged, blind or disabled cases shall be determined 
as follows: 

( 1 ) The reserve limit for two persons shall 
be allowed when spouses live together 
in a private living situation or when the 
couple share the same room in long 
term care; 

(2) Allow the reserve limit for one person 
for the Community Alternative Program 
(CAP) client with a spouse at home and 
only count the resources that are avail- 
able to the CAP client in determining 
his countable reserve; 

(3) The reserve limit for one person is 
allowed for the client who is in long 
term care and the spouse remains in the 
home: 

(4) The reserve allowance for one person is 
allowed for the client who is in long 
term care and the spouse is in domicili- 
ary care; 

(5) The reserve limit allowed for a blind or 
disabled minor child who lives with his 
parent or parents or is temporarily 
absent includes the child and the parent 
or parents with whom the child lives; 

(6) The reserve limit allowed for a blind or 



disabled dependent child under age 19 
who is in long term care shall include 
only the child if his care and treatment 
are expected to exceed 12 months, as 
certified by the child's physician. 

(e) Countable resources for Family and 
Children's related cases will be determined as 
follows: 

( 1 ) The resources of a spouse, who is not a 
stepparent, shall be counted in the 
budget unit's reserve allowance if the 
spouses live together or one spouse is 
temporarily absent in long term care 
and the spouse is not a member of 
another public assistance budget unit; 

(2) The resources of a client and a finan- 
cially responsible parent or parents 
shall be counted in the budget unit's 
reserve limit if the "parents live together 
or one parent is temporarily absent in 
long term care and the parent is not a 
member of another public assistance 
budget unit; 

(3) The resources of the parent or parents 
shall not be considered if a child under 
age 21 requires care and treatment in a 
medical institution and his physician 
certifies that the care and treatment are 
expected to exceed 12 months. 

(f) The homesite shall be excluded from count- 
able resources when it is the principal place of 
residence for the client. The homesite is defined 
as the house and lot, plus all buildings on the lot, 
in the city or the house and the land the house is 
on. to a maximum of one acre, plus all buildings 
on the acre, in a rural area. 

( 1 ) For all aged, blind or disabled cases 
and medically needy families and chil- 
dren related cases, in addition to the 
principal place of residence, the home- 
site shall include real property contigu- 
ous to the home with a tax value of less 
than twelve thousand dollars ($12,000). 

(2) For all aged, blind or disabled cases the 
equity in the homesite shall be excluded 
when the client is in long term care and 
his spouse, minor children or adult 
disabled children remain in the home or 
a physician has certified in writing that 
the client will return home within six 
months from the date of entry into the 
hospital or long term care facility. 

(g) For categorically needy aged, blind or 
disabled cases without grandfathered protection, 
nonhome property and personal property that is 



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January 15, 1993 



2236 



PROPOSED RULES 



income producing shall be excluded from resourc- 
es when the budget unit's equity in the property 
does not exceed six thousand dollars ($6,000) and 
the property produces a net annual return of at 
least six percent of the excludable equity value for 
each income producing activity. 

ihi For medically needy Families and Children 
cases and medically needy aged, blind or disabled 
cases without grandfathered protection, if the client 
or anv member of the budget unit has ownership in 
a probated estate, the value of the individual's 
proportionate share of the countable property shall 
be a countable resource unless the property can be 
excluded as the homesite or as income producing 
property, as stated in (e) and (f) of this Rule. 

(i) The equity in non-excluded real property 
shall be counted toward the reserve level of the 
budget unit. 

(j) A motor vehicle shall be determined an 
essential vehicle as follows: 

( 1 ) For aged, blind or disabled individuals 
with grandfathered protection, if public 
transportation cannot be used because it 
is not available or because of his physi- 
cal or mental condition and the vehicle 
is needed to: 
(A) Obtain regular medical treatment, or 
(Bi Retain employment, or 

(C) Go shopping if the shopping area is 
more than one-half mile from the 
client's home, or 

(D) Go shopping if the client is responsi- 
ble for shopping and is physically 
limited from walking one-half mile, 
or 

(E) Transport children to and from school 
and the school is not within reason- 
able walking distance: 

(2) For aged, blind or disabled cases with- 
out grandfathered protection and medi- 
cally needy Family and Children's 
related cases, a vehicle must be special- 
ly equipped for use by a handicapped 
individual, used to obtain regular medi- 
cal treatment, or used to retain employ- 
ment. 
(k) The value of non-excluded motor vehicles 
will bo determined bv the average whole s ale value 
li s ted in the Red Book. — If the vehicle is not listed 
in the Red Book, the value will be determined by 
knowledgeable s ource s . If the client — disagrees 



with the Red Book 



Jm 



obta 



in an apprais 

al at hi s own expense based on Part 5 Supple 

mental Security Income Manual, [s the Current 
Market Value, less encumbrances. If the appli- 



cant/recipient disagrees with the assigned value, he 
has the right to rebut the value. 

(li The current market value of a remainder 
interest in life estate shall be determined by apply- 
ing the remainder interest percentage from the 
chart in the Medicaid Eligibility Manual to the tax 
value of the property. A lower current market 
value for remainder interest may be established bv 
offering the interest for sale and the highest offer 
received, if any. is less than the value determined 
by application of the values chart to the tax value. 

(m) For all aged, blind or disabled cases, up to 
one thousand five hundred dollars (Si ,500) may be 
excluded from countable resources for the client 
and his spouse under the burial exclusion. Apply 
the one thousand five hundred dollar (S 1 .500 1 
burial exclusion for each individual separately. 
Only the following resources may be excluded and 
they must be excluded in the following order: 

( 1 ) Irrevocable pre-need burial contracts, 
burial trusts, or other irrevocable ar- 
rangements established for burial ex- 
penses: 

(2) Face value of life insurance policies 
that accrue cash value when the total 
face value of all policies for the budget 
unit is one thousand five hundred dol- 
lars ($1,500) or less and the cash value 
was not counted in reserve: 

(3) Revocable burial contracts or trusts 
established for burial expenses. Any 
excess remains a countable resource; 

(4) Cash value of life insurance that has 
been designated for burial expenses if 
the cash value was considered in deter- 
mining countable reserve. Any cash 
value in excess of one thousand five 
hundred dollars (SI. 500) remains a 
countable resource. 

(n) For all aged, blind or disabled cases and 
medically needy Family and Children's related 
cases, the value of trust funds established for the 
client or for any member of the budget unit is a 
countable resource unless it is determined by the 
courts that the funds are not available for the 
beneficiary of the trust. 

(o) For an institutionalized individual, the 
availability of resources are determined in accor- 
dance with 42 U.S.C. 1396r-5. Resources of the 
community spouse are not counted for the institu- 
tionalized spouse when: 

(1) Resources of the community spouse 
cannot be determined or cannot be 
made available to the institutionalized 
spouse because the community spouse 



2237 



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PROPOSED RULES 



cannot he located; or 
(2) The couple has been continuously sepa- 
rated for 12 months at the time the 
institutionalized spouse enters the insti- 
tution. 

Authority G.S. 108A-54; J08A-55: 143-127. 1(d); 
S.L. 1983, c. 1116:42 U.S.C. 1396r-5; 42 C.F.R. 
435.602: 42 C.F.R. 435. 711: 42 C.F.R. 435. 712: 
42 C. F. R. 435. 723: 42 C F. R. 435. 734: 42 C F. R. 
435.821; 42 C.F.R. 435.822: 42 C.F.R. 435.823: 
42 C. F. R. 435. 845: 45 C F. R. 233. 20: 45 C. F. R. 
233.51: Deficit Reduction Act of 1984 (P.L. 
98-369). Section 2373: 42 U.S.C. 1396a(a)(17); 
42 U.S.C 1396a(a)51; Schweiker v. Gray Pan- 
thers. 453 U.S. 34. 101 S. Ct. 2633. 69 L. Ed. 2d 
460 (1981). 

.0406 DEDUCTIBLE 

(a) Deductible shall apply to clients living in the 
community in private living quarters or residential 
group facilities, except that a client in long term 
care who is expected to return to his home within 
six months retains his private living status. 

(b) The client or his representative shall be 
responsible for providing bills, receipts, insurance 
benefit statements or Medicare EOB to establish 
incurred medical expenses and his responsibility 
for payment. If the client has no representative 
and he is physically or mentally incapable of 
accepting this responsibility, the county shall assist 
h i m . 

(c) Expenses shall be applied to the deductible 
when they meet the following criteria: 

( 1 ) The expenses are for medical care or 
service recognized under state or feder- 
al tax law; 

(2) The are incurred by a budget unit mem- 
ber; 

(3) They are incurred: 

(A) During the certification period for 
which eligibility is being determined 
and the requirements of Paragraph (d) 
of this Rule are met; or 

(B) Prior to the certification period and 
the requirements of Paragraph (e) of 
this Rule are met. 

(d) Medical expenses incurred during the certifi- 
cation period shall be applied to the deductible if 
the requirements in Paragraph (c) of this Rule are 
met and: 

( I ) The expenses are not subject to pay- 
ment by any third party including insur- 
ance, government agency or program 
except when such program is entirely 



funded by state or local government 
funds, or private source; or 

(2) The private insurance has not paid such 
expenses by the end of the application 
time standard; or 

(3) For certified cases, the insurance has 
not paid by the time that incurred ex- 
penses equal the deductible amount; or 

(4) The third party has paid and the client 
is responsible for a portion of the 
charges. 

(e) The unpaid balance of a Medical expense 
incurred prior to the certification period shall be 
applied to the deductible if the requirements in 
Paragraph (c) of this Rule are met and: 

(1) The medical expense was: 

(A) Incurred within 24 months immediate- 
ly prior to: 

(i) The month of application for 
prospective or retroactive certifi- 
cation period or both; or 

(ii) The first month of any subsequent 
certification period; or 

(B) Incurred prior to the period described 
in Subparagraph (e)(1)(A) of this 
Rule; and a payment was made on the 
bill during that period; and 

(2) The medical expense: 

(A) Is a current liability; 

(B) Has not been applied to a previously 
met deductible; and 

(C) Insurance has paid any amount of the 
expense covered by the insurance. 

(f) Incurred expenses shall be applied to the 
deductible in the order in which they are incurred 
by calendar date except that expenses remaining 
after insurance payments for lump sum charges 
shall be computed by: 

(1) Determining average daily charge ex- 
cluding discharge date from hospital; 
and 

(2) Determining average daily insurance 
payment for the same number of days; 
and 

(3) Subtracting average daily insurance 
payment from the average daily charge 
to establish client's daily responsibility. 

fg-) — If evidence of incurred medical expen s e s i s 
not provided within the time s tandard s allowed by 
the Alexander v. — Flaherty con s ent order, filed 
December 15, 1989. or the end of the certification 
period, the ca s e shall be denied eligibility. 

(g) {^Eligibility shall begin on the day that 
incurred medical expenses prove the deductible is 
met, except that the client shall be financially 



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January 15, 1993 



2238 



PROPOSED RULES 



liable for that portion of his medical expenses 
incurred on the first day of eligibility which are 
applied to the balance of the deductible. Notice of 
the deductible balance shall be sent to the hospital 
if the client was hospitalized on the date deductible 
is met. 

(h) fBThe receipt of proof of medical expenses 
and other verification shall be documented in the 
case record. 

Authority G.S. 108A-54; 42 C.F.R. 435.732; 42 
C.F.R. 435.831; Alexander v. Flaherty, USDC, 
WTDNC, File Number C-C-74-483; Alexander v. 
Flaherty Consent Order filed February 14. 1992. 

TITLE 1 1 - DEPARTMENT OF 
INSURANCE 

ISotice is hereby given in accordance with G.S. 
150B-21 .2 that the N. C. Department of Insurance 
intends to amend rules cited as 11 NCAC 4 .0418 
- .0419. .0421. .0423. .0428; repeal rule cited as 
11 NCAC 4 .0424; and adopt rule cited as 11 
NCAC 4 .0431. 

1 he proposed effective date of this action is April 
1. 1993. 

1 he public hearing will be conducted at 10:00 
a.m. on February 1 , 1993 at the Dobbs Building, 
3rd Floor Hearing Room, 430 N. Salisbury Street, 
Raleigh, N.C. 27611. 

MXeason for Proposed Action: To keep current 
with insurance industry practices and to afford 
consumers better protection in dealing with agents 
and insurers; and to comport with recodification of 
Chapter 58. 

(comment Procedures: Written comments may be 
sent to Bill Stevens, Consumer Division, P.O. Box 
26387. Raleigh, N.C. 27611. Oral presentations 
may be made at the public hearing. Anyone 
having questions should call Bill Stevens at (919) 
733-2004 or Ellen Sprenkel at (919) 733-4529. 

CHAPTER 4 - CONSUMER SERVICES 
DIVISION 

SECTION .0400 - PROPERTY AND 
LIABILITY 



.0418 TOTAL LOSSES ON MOTOR 
VEHICLES 

The commissioner shall consider as prima facie 
violative of G.S. 58 5 4 . 4 (11) 58-63-15(11) the 
failure by an insurer to adhere to the following 
procedures concerning settlement of covered "total 
loss" motor vehicle claims when such failure is so 
frequent as to indicate a general business practice: 

(1) If the insurer and the claimant are initial- 
ly unable to reach an agreement as to the 
value of the vehicle, the insurer shall 
base any further settlement offer not only 
on published regional average values of 
similar vehicles, but also on the value of 
the vehicle in the local market. Local 
market value shall be determined by 
using either the local market price of a 
comparable vehicle or. if no comparable 
vehicle can be found, quotations from at 
least two qualified dealers within the 
local market area. Additionally, if the 
claimant represents that the vehicle actu- 
ally owned by him was in better than 
average condition, the insurer shall give 
due consideration to the condition of the 
claimant's vehicle prior to the accident. 

(2) Where the insurer has the right to elect to 
replace the vehicle and does so elect, the 
replacement vehicle shall be available 
without delay, similar to the lost vehicle, 
and paid for by the insurer, subject only 
to the deductible and to the value of any 
enhancements acceptable to the insured. 

(3) If the insurer makes a deduction for the 
salvage value of a "total loss" vehicle 
retained by the claimant, the insurer, if 
so requested by the claimant, shall fur- 
nish the claimant with the name and 
address of a salvage dealer who will 
purchase the salvage for the amount 
deducted. The in s urer s hall be rc s pon s i 
bio for all reasonable towing and storage 
charge s until three days after the owner 
and storage facility are notified in writing 
that the insurer will no longer reimburse 
the owner or storage facility for storage 
charges. — Notification to the owner shall 
include the name, addre ss and telephone 
number of the facility where the vehicle 
i s being stored. — Notification to the s tor 
age facility shall include the name, ad 
dre ss and telephone number of the own 
e-P: — No insurer shall abandon the salvage 
of a motor vehicle to a towing and/or 
storage service without the agreed per 



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January 15, 1993 



PROPOSED RULES 



(4) 



(5) 



161 



mi ss ion of the service involved. — In in 
stances — where the towing and s torage 
charge s are paid to the owner, the chock 
or draft for the amount of such charge s 
s hall be payable jointly to the owner and 
the towing/storage servic e . 
If a written statement is requested by the 
claimant, a total loss payment by an 
insurer shall be accompanied by a written 
statement listing the estimates, evalua- 
tions and deductions used in calculating 
the payment, if any, and the source of 
these values. 

When a motor vehicle is damaged in an 
amount which, inclusive of original and 
supplemental claims, equals or exceeds 
75 percent of the preaccident actual cash 
value, as such value is determined in 
accordance with this Rule, an insurance 
carrierr shall "total loss" the automobile 
by paying the insured claimant the 
preaccident value, and in return, receiv- 
ing possession of the legal title of the 
salvage of said automobile. At the elec- 
tion of the in s ured claimant , or in those 
circumstances where the insurance carrier 
will be unable to obtain an unencumbered 
title to the damaged vehicle then the 
insurance carrier shall have the right to 
deduct the value of the salvage of the 
total loss from the actual value of the 
vehicle and leave such salvage with the 
insured claimant subject to the insurance 
carrier abiding by Subparagraph Subpara- 
graphs (3) and (6) of this Regulation 
Rule . No insurer, adjuster, appraiser, 
agent, or any other person shall enter 
into any oral or written agreement(s). by 
and between themselves, to limit an\ 



is being stored. Notification to the stor- 



original or supplemental claim(s) so as to 
artificially keep the repair cost of a dam- 
aged vehicle below 75% of its 
preaccident value, if in fact such original 
and any supplemental claim(s) exceed or 
would exceed 75% of the vehicle's 
preaccident value. 

The insurer shall be responsible for all 
reasonable towing and storage charges 
until three days after the owner and 
storage facility are notified in writing that 
the insurer will no longer reimburse the 
owner or storage facility for storage 
charges. Notification to the owner shall 
include the name, address, and telephone 
number of the facility where the vehicle 



age facility shall include the name, ad- 
dress, and, if available, telephone number 
of the owner. No insurer shall abandon 
the salvage of a motor vehicle to a tow- 
ing or storage service without the consent 
of the service involved. In instances 
where the towing and storage charges are 
paid to the owner, the check or draft for 
the amount of such service shall be pay- 
able jointly to the owner and the towing 
or storage service. 

Statutory Authority G.S. 58-2-40; 58-63-15. 

.0419 MOTOR VEHICLE REPAIR 
ESTIMATES 

The commissioner shall consider as prima facie 
violative of G.S. 58 5 4 . 4 (11) 58-63-15(11) the 
failure by an insurer to adhere to the following 
procedures concerning repair estimates on covered 
motor vehicle damage claims submitted when such 
failure is so frequent as to indicate a general 
business practice: 

( 1 ) If the insurer requires the claimant to 
obtain more than two estimates of proper- 
ty damage, the cost, if any, of such 
additional estimates shall be borne by the 
insurer. 

(2) No insurer shall refuse to inspect the 
damaged vehicle if a personal inspection 
is requested by the claimant. However, 
if the damaged vehicle is situated other 
than where it is normally used or cannot 
easily be moved, the insurer may satisfy 
the requirements of this Section by hav- 
ing a competent local appraiser inspect 
the damaged vehicle. 

(3) When the insurer elects to have the 
claimant's property repaired, the insurer 
shall, if so requested by the claimant, 
furnish the claimant with a legible front 
and back copy of its estimate. This 
estimate shall contain the name and ad- 
dress of the insurer and, if the estimate 
was prepared by a repair service, the 
name and address of that service. If 
there is a dispute concerning pre-existing 
damage to the vehicle which the insurer 
does not intend to have repaired, the 
extent of such damage shall be clearly 
stated in the estimate. 

f4) No insurer s hall require a claimant to 

utilize a particular repair service. 

(4) f5-) — He If requested by a claimant, an 



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2240 



PROPOSED RULES 



insurer shall refuse to provide to the 
claimant with copies of an- the estimate 
and all supplements thereto that it uses to 
offer a settlement. 

Statutory Authority G.S. 58-2-40; 58-63-15. 

.0421 HANDLING OF LOSS AND CLAIM 
PAYMENTS 

The commissioner shall consider as prima facie 
violative of G.S. S&-^9 58-3-100 and 58 5 4 . 4 (11) 
58-63- 1 5( 1 I ) failure by an insurer to adhere to the 
following procedures concerning loss and claim 
payments when such failure is so frequent as to 
indicate a general business practice: 

( 1 ) Loss and claim payments shall be mailed 
or otherwise delivered promptly within 
10 business days after the claim is set- 
tled. 

(2) Unless the insured consents, no insurer 
shall deduct from a loss or claim payment 
made under one policy premiums owed 
by the insured on another policy. 

(3) No insurer shall withhold the entire 
amount of a loss or claim payment be- 
cause the insured owes premium or other 
monies in an amount less than the loss or 
claim payment. 

(4) If a release or full payment of claim is 
executed by an insured or a claimant, 
involving a repair to a motor vehicle, 
prior to or at the time of the repair, it 
shall not bar the right of the claimant to 
promptly assert a claim for property 
damages unknown to either the claimant 
or to the insurance carrier prior to the 
repair of the vehicle., or a claim — fef 
dimini s hed value, which damages were 
directly caused by the accident and which 
damages could not be determined or 
known until after the repair or attempted 
repair of the motor vehicle. Claims 
asserted within 30 day s after repair for 
diminished value and 30 days after dis- 
covery of unknown damage shall be 
considered promptly asserted. 

(5) If a release or full payment of claim is 
executed by a third party claimant, in- 
volving a repair to a motor vehicle, it 
shall not bar the right of the third party 
claimant to promptly assert a claim for 
diminished value, which diminished value 
was directly caused by the accident and 
which diminished value could not be 
determined or known until after the 



repair or attempted repair of the motor 
vehicle. Claims asserted within 30 days 
after repair for diminished value shall be 
considered promptly asserted. 
(6) (5) Except in the total loss situations, the 
insurer shall be liable to the vehicle 
owner and others as their legal interest 
may require, for the full cost of repairs 
less policy deductibles, deprecia- 
tion/betterment and repairs made due to 
prior unrepaired damage on the vehicle. 
In total loss situations, the insurer shall 
protect any lienholder's interest, as re- 
corded with the Division of Motor Vehi- 
cles, by placing the lienholder's name on 
the settlement check or draft as co-payee. 

Statutory Authority G.S. 58-2-40; 58-3-100; 
58-63-15. 

.0423 ETHICAL STANDARDS 

(a) Every agent, limited representative, broker, 
adjuster, appraiser, or other insurer's representa- 
tive shall, when in contact with the public: 

(1) promptly identify himself and his occu- 
pation; 

(2) carry the license issued to him by the 
Department of Insurance while per- 
forming his duties and display it upon 
request to any in s ured or claimant, any 
repairer at which he is investigating a 
claim or loss, any department represen- 
tative, or any other person with whom 
he has contact while performing his 
duties; 

(3) conduct himself in such a manner as to 
inspire confidence by fair and honor- 
able dealings. 

(b) No adjuster or apprai s er claims management 
person, agent, agency employee, limited represen- 
tative, broker, adjuster, appraiser, or other 
insurer's representative shall: 

{\A recommend the utilization of a particu 

lar motor vchielo repair service without 
clearly informing the claimant that he is 
under no obligation to u s e the rccom 
mended repair service and may use the 
s ervice of hi s choice; 

(1) {3} accept any gratuity or other form 
of remuneration from a repair s ervice 
any provider of services for recom- 
mending that repair service provider to 
claimants; 

(2) Q) purchase salvage from a claimant; 
who s e claim he i s adju s ting or appra i s 



2241 



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PROPOSED RULES 



ing without fir s t di s clo s ing to the claim 
ant the nature of his interest in the 
transaction; 

(3) (4) intimidate or discourage any claim- 
ant from seeking legal advice and coun- 
sel by withdrawing and reducing a 
settlement offer previously tendered to 
the claimant or threatening to do so if 
the claimant seeks legal advice or coun- 
sel. No adjuster shall advise a claimant 
of the advisability of seeking or not 
s eeking legal counsel nor s hall recom- 
mend any legal counsel to any claimant 
under any circumstancer j 

(4) cause any undue delay in the settlement 
of a property damage claim on account 
of the claimant's choice of a motor 
vehicle repair service. 

(c) No claims management person, agent, 
agency employee, limited representative, broker. 
or other insurer's representative shall recommend 
the utilization of a particular motor vehicle repair 
service without clearly informing the claimant that 
he is under no obligation to use the recommended 
repair service and that he may use the service of 
his choice. 

Statutory Authority G.S. 58-2-40; 58-33-10; 
58-33-25; 58-33-30; 58-35-25; 58-63-15; 
58-65-40. 

.0424 PURPOSE 

The purpose of this Rule is to set forth s tandards 
for prompt. — fa+r-^ — aftd — equitable — s ettlement s — ef 
motor vehicle insurance claim s with regard to the 
u s e of after market parts. 

Statutory Authority G.S. 58-9. 

.0428 ENFORCEMENT 

Violations of this Section which 11 NCAC 4 
.0425 through 1 1 NCAC 4 .0427 that are so 



frequent as to indicate a general business practice 
shall be deemed by the Commissioner to be an 
unfair trade practice under Article ^A 63 of Gen- 
eral Statute Chapter 58. 

Statutory Authority G.S. 58-9. 

.0431 DEFINITION OF CLAIMANT 

As used in this Section, unless the context clearly 
indicates otherwise, "claimant" means a first party 
claimant or a third party claimant. 

Statutory Authority G.S. 58-2-40(1 ); 58-3-1 00(5); 



58-63-15. 

1\ otice is hereby given in accordance with G.S. 
150B-21.2 that the N. C. Department of Insurance 
intends to amend rules cited as 11 NCAC 11 A 
. 0102. . 0501 - . 0503. . 0505, . 0508. . 0510 - . 051 1 . 
.0513; 11 B .0108 - .0110. .0113. .0119. .0131. 
.0503. .0601 -.0602. .0604. .0607 -.0610. .0612; 
11C .0103. .0108 - .0109. .0114. .0117 - .0118. 
.0128 - .0129. .0403; 11D .0104. .0108 - .0109. 
.0111 - .0112. .0118. .0145 - .0147. .0159 - 
.0160, .0303. .0305; HE .0202, .0303; adopt 
rides cited as 11 NCAC 11 B .0215 - .0223. .0506 

- .0518. .0615; UC .0132, .0206. .0307 - .0317. 
.0501 - .0503. .0601 - .0605; HE .0203; 11 H 
.0001 - .0012; and repeal rules cited as 11 NCAC 
11 A .0101. .0103 - .0104. .0107 - .0108. .0401 - 
.0407. .0409 - .0432. .0435 - .0449. .0452 - 
.0457, .0460 - .0493; 11 B .0101 - .0103, .0105, 
.0107. .0116- .0118. .0121, .0132. .0143. .0202 

- .0214. .0402 - .0407. .0501; 11C .0107. .0111. 
.0115- .0116. .0121, .01 23,. 01 27,. 0202 -.0205, 
.0302 - .0306; 11 D .0105 - .0106, .0113 - .0114. 
.0202; HE .0102 - .0105, .0201, .0306 - .0310. 
.0402 - .0405; 1 IF .0002 - .0010. 

1 he proposed effective date of this action is April 
1. 1993. 

1 he public hearing will be conducted at 10:00 
a.m. on February 5. 1993 at the Dobbs Building. 
3rd Floor Hearing Room. 430 N. Salisbury Street, 
Raleigh, N.C. 27611. 

Reason for Proposed Action: To modernize and 
improve the rules governing the monitoring of 
financial affairs of insurance companies. 

Lsomment Procedures: Written comments may be 
sent to Ray Martinez, P.O. Box 26387. Raleigh. 
N. C. 27611. Oral presentations may be made at 
the public hearing. Anyone having questions 
should call Ray Martinez at (919) 733-5633, or 
Ellen Sprenkel at (919) 733-4529. 

CHAPTER 1 1 - FrNANCIAL EVALUATION 
DIVISION 

SUBCHAPTER 11 A - GENERAL 
PROVISIONS 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2242 



PROPOSED RULES 



SECTION .0100 - DEFINITIONS 

.0101 STATUTORY FINANCIAL 
STATEMENT 

"Statutory — Financial — Statement" — shall — mean 
financial statement s prepared in accordance with 
the requirement s of the As s oc i ation Edition of the 
Annual — Statements — appro ved — by — tke — National 
Association — of — Insurance — Commi ss ioners. — ffee 
instructions that accompany each s uch s tatement. 



tttd- 



rn accordanc e 



with s tatutory accounting prae 
ticcs including such rule s of the Department as are 
applicable to the preparation or pre s entation of 

each such annual s tatement. 



shall be given to assets not admitted in accordance 
with s tatutory accounting practices. 

Statutory Authority- G.S. 58-38; 58-155.2(1). 



.0107 MORTGAGE GUARANTY 
INSURANCE 

"Mortgage — Guaranty — In s urance" — 



i 



AaU- 



insurance — of mortgage — lenders — against 



M 



reason of nonpayment of mortgage indebtednes s by 
the borrower: and a s authorized by G.S. 58 72( 17) 
of the General Statutes of North Carolina. 



Statutory Authority G.S. 58-9(1 ); 58-72(17). 



Statutory Authority G.S. 57-9; 58-9(3); 58-21. 

.0102 UNSOUND CONDITION 

"Unsound Condition"^ shall mean the exi s tence 
as used in G.S. 58-3-90 and 58-3-100. means that 
the state of affairs of any insurance company is 
such that the Commissioner has determined that its 
continued operations may be hazardous to its 
policyholders, creditors, or the general public, 
after the Commissioner has considered any or aU 
of the standards set forth in G.S. 58-30-60(b). 
licen s ed in this state: 



.0108 MISCELLANEOUS INSURER 



fH- 



G£- 



whose financial or operational condition 
is such that it may be potential l y unable 
to meet it s obligation s to the polieyhold 
ers and claimant s of thi s s tate, or 



tas experienced suen a s ub s tantial loss 
from operations or reduction in s urplus 
a s to render it potentially unable to meet 
it s obligations in this state. 



Statutory Authority G.S. 
58-3-100; 58-30-60(h). 



58-2-40; 58-3-90; 



.0103 IMPAIRED INSURER 

"Impaired Insurer" shall mean the existence of a 
company who s e admitted a ss et s arc le ss than the 
aggregated amount of it s liabilit i e s and it s out 
s tanding capital stock or required m i nimum s ur 
plus, or both. 



Statutory Authority G.S. 58-39(2); 58-77(10). 



.0104 INSOLVENT INSURER 



Insolvent Insurer — s hall mean the exi s tence or a 
company whose aggregate liabilities, exclu s ive of 
capitalization, exceed the admitted as s ets of the 
company a s determined on the basis of s tatutory 
accounting practices. — In making the determination 
of the ex is tence of an in s o l vent insurer no credit 



'Miscclk 



lisccllaneous Insurer — shall mean any company 
licen s ed in this s tate and not being a life. fire. 

ca s ualty. — ef — multip l e line — in s urer. T4w — term 

miscellaneous in s ur e r includes, but is not limited 
te-, — trtk — insurer. — reciprocal — insurer. — fraternal 
benefit association insurer, hospital s ervices corpo 
ration — insurer. — town — m4 — county — f-afm — mutual 
in s urer and underwriter in s urer. 



Statutory Authority G.S. 58-9. 

SECTION .0400 - DESCRIPTION OF 
FORMS 

.0401 APPLICATION FOR ADMISSION TO 
DO BUSINESS IN NC 

The Petition for Application for Admission is 
part of the application for the initial licen s e of an 
insurance company to do business in North Cnroli 



( 



f»: The form — include s the company's name. 

company' s addre ss . — item s required by petition- 
certain financial data of company and other pcrti 
nent information. 



Statutory Authority G.S. 58-150. 

.0402 POWER OF ATTORNEY FOR 
SERVICE OF LEGAL PROCESS 

The Power of Attorney for Service of Legal 
Proce ss is part of the application for initial license 
of an insurance company to do busines s in North 
Carolina. The form include s , but i s not limited to. 
a s igned statement by officials of the company 
appoint i ng the Commi ss ioner of Insurance a s it s 
true and lawful attorney upon whom proce s se s of 
law against said corporation in any action or l e gal 
proceeding s ubject to and in accordance with the 
law s of the State of North Carolina. 



i 



2243 



7:20 



XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Statutory Authority G.S. 58-150(3): 58-153. 

.0403 POWER OF ATTORNEY FOR SALE 
OF SECURITIES 

The Power of Attorney for Sale of Securities is 
part of the application for the initial license of an 
in s urance company to do business in North Caroli 
mt-. — The form includes a s igned statement by 
official s of the company authorizing the Commis 
sioner of Insurance as lawful attorney to s ell and 
transfer securitie s on deposit with the Department 
as far as s uch sale may b e nece ss ary to pay any 
liability — of the — company. — together with — other 
pertinent information relative thereto. 

Statu ton' Authority G.S. 58-182.5. 

.0404 APPLICATION FOR LICENSE: 
GENERAL 

The Application for Licen s e i s prepared 



Application for Licen s e i s prepared annually 
for a renewal licen s e or initial license of an in s ur 
ance company and i s applicable to all insurance 
companie s , domestic and foreign, except ho s pital 
and medical service corporations, dental service 
corporation s and fraternal order s . The form in 
elude s the company' s name, company's address, 
president and secretary of the company, schedule 
of fees payable and other pertinent information. 

Statutory Authority G.S. 58-15: 58-63(1): 58-66; 
58-72; 105-228. 4(a). 

.0405 APPLICATION FOR LICENSE: 

HOSPITALS: MEDICAL SERVICE 

Thi s application for license is prepared annually 
for the renewal license or initial license of hospital 
and medical service corporations. The form in 
eludes the company' s name, company' s addre ss , 
pre s ident and s ecretary of the company, a s chedule 
of fees payable and other pertinent information. 

Statutory Authority G.S. 58-15; 58-63; 58-72; 
105-228.4(a). 



.0406 APPLICATION FOR LICENSE: 

DENTAL SERVICE CORPORATION 



T-h+ 



lis application for license is prepared annually 
for the renewal lic e n s e or initia l licen s e of dental 

service — corporation s . The — form — includes — the 

company' s — name, company's address. — pre s ident 



and 



tarv of the 



ipany. 



i ehcdulc of fees 



payable and other pertinent information. 

Statutory Authority G.S. 58-15; 58-63; 58-72; 
105-228. 4(a). 



.0407 APPLICATIONS FOR LICENSE: 
FRATERNAL ORDER 

This application for license is prepared annua 
for the renewal licen s e or initial license of frater 



^ 



ordc 



The for 



jlude s the 



nal orders. 1 lie form include s tne company a 

name, company' s addre ss , pre s ident and s ecretary 
of the company, a s chedule of fee s payable and 
other pertinent information. 

Statutory Authority G.S. 
105-228. 4(a). 



58-15; 58-63; 58-72; 



.0409 INSURANCE COMPANY LICENSE 

The — In s urance Company — Licen s e — js — prepared 
annually and represents the renewal — licen s e or 
initial license of the applicant insurance company. 
Thi s form i s the insurance company' s authority to 
transact busines s in the State of North Carolina 



indicated 



until the expiration of the fi s cal year indicate 
therein. — The form includes the company's name, 
company's address, authorized line s of business 
and other pertinent information. 

Statutory Authority G.S. 58-15; 58-72; 105-228.4. 

.0410 DEPOSIT BOND FORM 

The Deposit Bond Form shall be used by fire and 
casualty companies wishing to file a surety bond in 
lieu of a deposit of securities. — The form s hall 
include the name of the principal, s urety, penal 
s um. obligee, effective date, s erial number, terms 
and condition s of the bond, and other p e rtinent 
information. 



Statutory Authority G.S. 58-188.8. 



.041 1 FIRE AND CASUALTY ANNUAL 
STATEMENT BLANK 

The Fire and Ca s ualty Annual Statement Blank is 
used by insuranc e companie s for required annual 



reports to the Cor 



a ioner. The form i s used by 



fire and casualty companie s and such other compa 
nie s a s may be s pecified by th e Department. — The 
form includes the company's name, company's 
address, executive officer s and board of directors 
of the — company, — financial — information on — the 
company and — it s operations, detailed schedule s 
related thereto and other pertinent information. 

Statutory Authority G.S. 58-9(3); 58-21; 58-144. 



.0412 COMPLETING FIRE AND 

CASUALTY ANNUAL STATEMENT 
BLANK 

The se — in s truction s are — u s ed by — ah — insurance 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2244 



PROPOSED RULES 



companies which are required to report to the 
Commissioner on the Fire and Casualty Annual 



Statement — Blank. The — form — include 



j no ml 



ies — get 
in s tructions, and s pecific instructions for lines and 



terns about which there might bo some que s tion a s 



t 

to content, for preparation of the Fire and Casualty 

Annual Statement Blank and other pertinent infor 

mation. 

Statutory Authority G.S. 58-9(3); 58-21; 58-144. 



.0416 ANNUAL STATEMENT BLANK: 
INSTRUCTIONS 

Those instruction s are u s ed by life and accident 
and health insurance companies which are required 
to report to the Commi ss ioner. Tho form includes 
general in s truction s , and specific instructions for 
linos and items about which there might be s ome 
que s tions as to content, for preparation of the Life 
and Accident and Health Annual Statement Blank 
and other pertinent information. 



.0413 CONSOLIDATED ANNUAL 

STATEMENT: FIRE AND CASUALTY 
INSURERS 

These instruction s are used by affiliated eompn 
nies which are required to report to the Connni s 
sioner on the Fire and Casualty Annual Statement 
Blank. — The form includes general in s truction s , 
and specific in s tructions for lines and items about 
which there might be some que s tion a s to content. 



t s olidated anni 



state 



for preparation of the 

ment for affiliated fire and casualty in s urer s and 

other pertinent information. 

Statutory Authority G.S. 58-9(3); 58-21; 58-144. 

. 04 1 4 FIRE AND C ASUALTY QUARTERLY 
STATEMENT BLANK 

The Fire and Casualty Quarterly Statement Blank 
is used by all insurance companies which complete 



the Fi 



and Casualty — Annual — Statement — Blank 



which arc required by the Commi s sioner to report 

on a quarterly basis. The — form — includes the 

company's name, company' s address, executive 



officers and board of directors o 



£-fe 



:npany. 
financial — information — ©a — the — company — frftd — its 



related thereto — and other 



operations. — schedule s 
pertinent information. 

Statutory Authority G.S. 58-9(3); 58-21; 58-25.1. 
58-144. 



Statutory Authority G.S. 58-9(3); 58-21. 

.041 7 LIFE AND ACCIDENT AND HEALTH 
QUARTERLY STATEMENT BLANK 

The — Life and — Accident and — H e alth Quarterly 
Statement Blank i s u s ed bv life and accident and 



id bv 



health insurance companie s which are rcquirec 
the Commissioner to report on a quarterly basis. 



T4* 



form 



jludc 



-fe 



ipany 



name. 



company's address, executiv e officers and board of 
directors of the company, financial information on 
the company and its operations, schedule s related 
thereto and other pertinent information. 



Statutory Authority G.S. 58-9(3); 58-25. 1; 58-21. 

.0418 ANNUAL STATEMENT BLANK: 
SEPARATE ACCOUNT BUSINESS 

The Life and Accident and Health Annual State 

ment Blank Separate Account Business is used 

by life and accident and health insurance compa 
nie s to report annually to the Commi s sioner the 
financial condition of and the re s ult s of the opera 
tion of its separate account bu s ine s s. — The form 
includes the company' s name, addres s , executive 
officer s and board of director s of the company- 
financial — information — efl — the — s eparate — account 
bu s ine ss of the company and it s s eparate account 
operations, detailed schedule s related thereto and 
other pertinent information. 



.0415 LIFE AND ACCIDENT AND HEALTH 
ANNUAL STATEMENT BLANK 

The Life and Accident and Health Annual State 
ment Blank i s u s ed by life and accident and health 
in s urance companie s which arc requ i red to report 
to the Commissioner annually. — The form includes 
the company's name, company' s addre ss , execu 
tive officers and board of director s of the compa 
nv. financial information on the company and it s 



operation s , detailed s chedule s related thereto and 
other pertinent information. 

Statutory Authority G.S. 58-9(3); 58-21. 



Statutory Authority G.S. 58-9(3); 58-21; 58-79.2. 

.0419 TITLE ANNUAL STATEMENT 
BLANK 

The Title Annual Statement Blank is used by title 
insurance companies which are required to report 
to the Commissioner annually. — The form includes 
the company's name, company' s addre ss , execu 



tw 



officers and board of director s of the 



:ompa 



ny. financial information on the company and its 
operation s , detailed schedules related thereto and 
other pertinent information. 



2245 



7:20 



XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Statutory Authority G.S. 58-9(3); 58-21; 58-134. 



.0420 



T-h* 



INSTRUCTIONS FOR COMPLETING 
TITLE ANNUAL STATEMENT 
BLANK 



=tese — in s truction s ar e — used by title in s urance 
companies which are required to report to the 
Commissioner — em — the — Titl e — Annual — Statement 



Bkmk- 



The form includes general instruction s . 



and s pecific instruction s for lines and items about 
which there might be some question a s to content, 
for preparation of the — Title — Annual — Statement 
Blank and other pertinent information. 



Statutory Authority G.S. 58-9(3); 58-21; 58-134; 
58-137. 



.0421 TITLE QUARTERLY STATEMENT 
BLANK 

The Title — Quarterly Statement Blank i s u s ed by 
title insurance companie s which arc required by 
the Com 



ioner to report on a quarterly ba s 



T-he — form — includes — the — company' s — name, 
company's address, executive officers and board of 
directors of the company, financial information on 
the company and it s operations, schedules related 
thereto and other pertinent information. 

Statutory Authority G.S. 58-9(3); 58-21; 58-25.1; 
58-134; 58-137. 



.0422 HOSPITAL: MEDICAL AND DENTAL 
SERVICE OR INDEMNITY CORP 

The Hospital, Medical and Dental Service or 
Indemnity Corporation Annual Statement Blank is 
used by hospital, medical and dental s ervice or 
indemnity — corporations — which — are — required — te 
report to the Commi ss ioner annually. — The form 
includes the company' s name, company's addre ss , 
executive officers and board of directors of the 
company, financial information on the company 
artd — rf« — operations. — detailed — schedules — related 
thereto and other pertinent information. 



Statutory Authority G.S. 57-9. 



.0423 



Tht 



DESTRUCTIONS/ ANNUAL 
STATEMENT BLANK: HOSPITAL: 
MEDICAL: DENTAL 



le s e in s truction s are u s ed by ho s pital, medical 
and dental service or indemnity corporations which 
arc required to report to the Commi s sioner on the 
Ho s p i tal. Medical and Dental Service or Indemnity 
Corporation Annual Statement Blank. — The form 
include s general in s truction s , and s pecific instrue 



tions for lines and item s about which there might 
be some question a s to content, for preparation of 
Ho s pital. Medical and Dental Service or Indemnity 
Corporation Annual Statement Blank and other 
pertinent information. 

Statutory Authority G.S. 57-9. 



.0424 FRATERNAL ANNUAL STATEMENT 
BLANK 

The Fraternal Annual Statement Blank is used by 
fraternal insurance companie s which are required 
to report to the Commissioner annually. The form 
includes the company's name, company's address, 
executive officer s and board of directors of the 
company, financial information on the company 
and — rts — operation s , — detailed — schedules — related 
thereto and other pertinent information. 



Statutory Authority G.S. 58-9(3); 58-292. 



.0425 INSTRUCTIONS FOR COMPLETING 
FRATERNAL STATEMENT BLANK 

These instructions are used by fraternal orders 
which are required to report to the Commi ss ioner 
on the Fraternal Annual Statement B l ank. — The 
form include s general in s truction s , and s pecific 
in s truction s for lines and item s about which there 
might be some questions as to content, for prepa 
ration of the Fraternal Annual Statement Blank and 
other pertinent information. 

Statutory Authority G.S. 58-9(3); 58-292. 



.0426 FRATERNAL QUARTERLY 
STATEMENT BLANK 

When a fraternal order i s required by the Cor 



Ten n Traternal order i s required by the t.om 
missioner to report on a quarterly basi s , — sueb 
quarterly s tatement s hall be on the form designated 
as 11 NCAC 1 1 A .0 4 17 Life and Accident and 

Health Quarterly Statement — Blank. The form 

include s the company' s name, company's addre ss , 
executive officers and board of directors of the 
company, financial information on the company 
and its operations, schedule s related thereto and 
other pertinent information. 

Statutory Authority G.S. 58-9(3); 58-292. 

.0427 ACCIDENT AND HEALTH POLICY 
EXPERIENCE EXHIBIT 

T-fre — Accident — artd — Health — Policy — Experience 
Exhibit — is prepared and — filed annually — by all 
companies with accident and health insurance to 
reflect its accident and health policy experience 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2246 



PROPOSED RULES 



during n year and is a supplement to the year end 



annual — statement. 



The — form — include 



-tht 



company's name. — eompany's addre ss , kind s of 
aeeident and health policies, a brief breakdown of 
premiums, losse s , commis si on s and other pertinent 
information. 



Statutory' Authority G.S. 58-2]: 58-25. J. 



.0428 CREDIT LIFE AND ACCIDENT AND 
HEALTH EXHIBIT 

The Credit Life and Accident and Health Exhibit 
i s prepared and filed annually by all companie s 
w-+th — credit — 1+f-e — and credit — accident — and — health 
i nsurance to reflect its experience on such business 
during a \ car and i s a s upplement to the year end 



annual — statement. 



-AA^e — form — include 



-tbe 



company's name, type and kind of credit life 
insurance policie s , type and kind of credit accident 



ni — health — insurance — pel 



and 



trcmium s . 



losses, expenses, gain from operation s on each 
type and kind of credit policv listed and other 



type 

pertinent information. 



Statutory Authority G.S. 58-23. 1 . 

.0429 CREDIT LIFE INSURANCE 
STATISTICAL REPORT 

The Credit Life In s urance Statistical Report is 
prepared and filed annually by all insurance com 
panics with credit life insurance to reflect certain 
s tati s tical data on s uch business during a year and 
is a supplement to the year end annual statement. 
The form includes the eompany's name, type and 



ind of credit life insuranc 



policies. 



and 



pft 



urn s and lo s se s on each type and kind of credit life 
policy li s ted and other pertinent information. 

Statutory Authority G.S. 58-21; 58-25. 1. 

.0430 INSURANCE EXPENSE EXHIBIT 



T4* 



Insurance hxpense hxhibit is prepared and 
filed annually by all companie s required to report 
on the Fire and Casualty Annual Statement Blank 
to reflect its in s urance expenses on all lines of 
business written during a year and is a supplement 

to the year end annual — s tatement. T-be — form 

includes the company's name, company' s addre s s. 
allocation to expense groups, allocation to line s of 
business, citing adju s tment for effect of premium 
discounts — and — retrospective — rating. — exhibit — ef 
workmen's compensation earned — premiums and 
incurred — losses — by- — state — and — other — pertinent 
information. 



Statutory Authority G.S. 58-9(3): 58-130; 
58-131.14. 

.0431 STOCKHOLDER INFORMATION 
SUPPLEMENT 

T-be — Stockholder — Information — Supplement — is 
prepared and filed annually by all stock companies 
which have 100 or more s tockholders to di s close 
certain stockholder information and is a supple 
ment to the year end annual s tatement. — The form 



include 



es — me — company s — name. — interrogatories 
relative — te — financial — reporting — te — stockholders, 
information regarding management and directors. 
a statement of beneficial ownership of securities 
and other pertinent information. 



Statutory Authority G.S. 58-9(3). 



. 0432 TOWN OR COUNTY FARM MUTUAL 
ANNUAL STATEMENT BLANK 

Tbe — Town — of — County — Farm — Mutual — Annual 
Statement Blank is used by town or county mutual 
insurance companie s which are required to report 
to the Commi s sioner annually. — The form includes 
the company's name, company' s addre s s, execu 
tivc officers and board of director s of company. 



tmancial information — ©fl — mt 



-and — its 



mpany 

operations, schedules related thereto and other 
pertinent information. 

Statutory Authority G.S. 58-9(3); 58-21. 

.0435 ANNUAL GROSS PREMIUM TAX 
RETURN: RETALIATORY TAX 
RETURN 

The Gros s Premium Tax Return i s prepared and 
filed annually for the computation and collection of 
gro ss — pr e mium — taxe s — &h — gros s — premiums. — as 
defined bv N.C.G.S. 105 228.5. from business 



-dm 



-te 



;ndnr 



done in thi s s tate during tne preceding calei 
year by every in s urance company except ho s pital 



and 



jdical 



dental 



service corporations, 
corporations. — farmer's — mutual — assessment — frre 
in s urance companie s and fraternal orders or societ 
f&r. — The — form — include s — fbe — company's — name, 
company's address, taxable premium s , tax eompu 
tation procedures and other pertinent information. 

Statutory Authority G.S. 105-228.5. 

.0436 STATEMENT OF LNSTALLMENT 
GROSS PREMIUM TAX 



-Pfe 



Tax 



The Statement of Estimated Gro ss Premium 
is prepared and filed quarterly for the computation 
and collection of gro ss premium taxes on estimated 



2247 



7:20 



XORTH CAROLIXA REGISTER 



January 15, 1993 



PROPOSED RULES 



quarterly taxable — premiums collected — m — North 
Carolina by insurance companies that arc chartered 
in a s tate which require s dome s tic North Carolina 
companie s to pay taxes quarterly on premiums 
collected in that s tate. — The form include s the 
company's name, company's address, computation 
procedures for estimated premium taxes due and 
other pertinent information. 



Statutory Authority G.S. 105-228.5. 

.0437 ANNUAL ADDITIONAL GROSS 
PREMIUM TAX RETURN 



The — Additional — Annual — Gro ss — Premium — Ta* 
Return is prepared and filed annually for the 
computation — and collection — of additional — gros s 
premium taxes on fire and lightning premiums 
collected by insurance companies doing business in 
North Carolina. The form includes the company's 
name, company' s address, taxable premium s , tax 
computation procedures and other pertinent infor 
mat ion. 



Statutory Authority G.S. 105-228.5. 

.0438 STATEMENT/INSTALLMENT 

ADDITIONAL ANNUAL GROSS 
PREMIUM TAX 

The Statement of Estimated Additional Annual 
Gro ss Premium Tax is prepared and filed quarterly 
for the computation and collection of additional 
gross premium taxe s on estimated quarterly fire 
and lightning premiums collected by in s urance 
companies doing business in North Carolina that 
are chartered in a s tate which requires domestic 
North Carolina companies to pay taxes quarterly 
on premium s collected in that state. — The form 
include s the company' s name, company's addre s s, 
computation procedures — for estimated — premium 
taxes due and other pertinent information. 



Statutory Authority G.S. 105-228.5. 

.0439 NC FIREMEN'S RELIEF FUND TAX 
ANNUAL RETURN 



The N.C. Firer 



Relief Fund Tax Annual 



iremen s Kelier huna — lax Anni 
Return — is — prepared — em4 — filed — annually — for th e 
computation and collection of the N.C. Firemen's 
Relief Fund tax on taxable premium s collected by 
in s urance cc 



ompanie s in North Carolina 



-fife 



in s urance business done within the corporate limit s 
of a — erty — ef — town. The — form — includes — the 



-ate 



ress. 



taxable 



company s — name. — company s 

premiums, tax computation procedures and othc 

pertinent information. 



Statutory Authority G.S. 118-1 to -4. 

.0440 ANNUAL FRANCHISE OR 

PRIVILEGE TAX: HOSP AND 
MEDICAL CORP 



The Annual Franchi 



Privilege Tax — Hospital 



and Medical Serv i ce Corporation i s prepared and 
filed annually for the computation and collection of 
taxe s on gross annual collections as defined by 
N.C. G.S. 57 1 4 from ho s pital and medical s ervice 
corporations. — The form include s the company' s 
name, the company's address, taxable premiums, 
tax computation s procedures and other pertinent 
information. 



Stat ii ton- Authority G.S. 57-14. 



.0441 ANNUAL FRANCHISE OR 

PRIVILEGE TAX: DENTAL SERVICE 
CORP 

The Annual Franchise or Privilege Tax Dental 
Service Corporation is prepared annually for the 
computation — and — collection — of taxes — en — gro ss 
annual collections as defined by N.C. G.S. 57 1 4 

from — dental — s ervice — corporations. The — form 

include s the company' s name, company's addre ss , 
taxable premiums, tax computation procedures and 
other pertinent information. 

Statutory Authority G.S. 57-14. 



.0442 NC DOMESTIC CORPORATION 
FRANCHISE AND FNCOME TAX 
RETURN 

The — North — Carolina — Domestic — Corporation 
Franchise and Income Tax Return is used annually 
in the computation and collection of income tax on 
domestic insurance companies that would other 
wise qualify to pay gro ss premium tax. — The form 
i s s upplied by the North Carolina Department of 
Revenue and is used by the Department of Insur 
ance with the knowledge and authority of the 
Department of Revenue for domestic insurance 
companie s only. The form include s the company's 
name, company's address, tax computation proc e 
dures and other pertinent information. 



Statutory Authority G.S. 105-228.5. 

.0443 AUTOMATIC EXTENSION OF TIME 
TO FILE 

The North Carolina Application for Automatic 
Exten s ion of Time to File Corporation Franchise 
and Income Tax Return is used annually, when 
reque s ted, for exten s ion of time to file corporation 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2248 



PROPOSED RULES 



franchise and income tax return for an in s urance 
company domiciled in North Carolina. — The form 
is supplied by the North Carolina Department of 
Revenue and i s used hy the Department of [n s ur 
anec with the knowledge and authority of the 
Department of Revenue for domestic insurance 
companies only. The form includes the company's 
name, — company' s — address, — e stimated — tax — artd 
payment required and other pertinent information. 



the — adequacy — ©f- — the — "stock" — and — "mutual" 
workmen's compensation s ecurity funds on deposit 

with — the — State — Trea s urer. T-he — form — includes 

company's name, aggregate amount of workmen's 
compensation loss reserve s applicable to North 
Carolina, type of company, signature of officer of 
company and other pertinent i nformation. 

Statutory Authority G.S. 97-107; 97-114. 



Statutory Authority- G.S. 58-9. 



.0444 



ADDITIONAL EXTENSION OF TIME 
TO FILE 



The North Carolina Application for Additional 
Extension of Time to Fi l e Corporation Franchise 
and Income Tax Return is u s ed annually, when 
requested, for an additional exten s ion of time to 
file corporation franchise and income tax for an 
insurance company domiciled in North Carolina. 
The form is supplied by the North Carolina Be 
partment of Revenue and i s u s ed by th e Depart 
ment of Insurance with the knowledge and authori 
ty of the Department of Revenue for dome s tic 
in s urance companies only. — The form inc l ude s the 
company's name, company's addre ss , balance of 
anv estimated tax not previou sl y paid and other 
pertinent information. 



Statutory Authority- G.S. 5S-9. 

.0445 REFUND FOR CORPORATION 

FRANCHISE AND INCOME TAXES 

T-he — North — Carolina — Refund for Corporat i on 
Franchi s e and Income Taxes is used for the refund 
of corporation franchise and income taxe s for an 
in s urance company domiciled in North Carolina. 



The for 



■ lied bv the North Caro l ina Be 



r-9Upf 

partment of Revenue and i s u s ed by the Depart 
ment of In s urance with the knowledge and authori 
ty of the Department of Revenue for dome s tic 
in s urance companie s only. — The form include s the 
company' s name, company's address, tax refund 
computations and other pertinent information. 



Statutory Authority G.S. 105-228.5. 



.0446 CERTIFICATION OF WORKMEN'S 
COMPENSATION LOSS RESERVES 

The Certification of Workmen' s Compen s ation 
Lo ss — Reserves — Form — is completed annually to 



jrtit'y the amount of work met 



mipensation 



loss reserve s applicable to North Carolina which 



arc held by s tock 



itual 



ca s ualty companies 
and reciprocal organization s in order to determine 



.0447 WORKMEN'S COMPENSATION 
ASSESSMENT FORM 

The Workmen' s Compensation Assessment Form 
i s used to report the workmen's compensation 
premiums written in North Carolina to be assessed 
at the rate of one percent to build up the eontribu 
tion s — in the — " s tock" — and — "mutual" — workmen's 
compen s ation s ecurity funds in North Carolina to 
the — statutory — minimum of five — percent of the 
reported workmen's compen s ation loss reserves 
applicable to North Carolina. — The form includes 
the company's name. — workmen' s compensation 



premiums 



written in North Carolina. 



-f* 



trti 



a ss e ss ment amount, signature of officer of eompa 
ny. and other pertinent information. 

Statutory Authority G.S. 97-107; 97-114. 

.0448 FORM HC: INSURER HOLDING 
COMPANY REGISTRATION 
STATEMENT 

T-he — Form — HG In s urer Holding Company 

Regi s tration Statement i s pr e pared by insurance 
companie s s ubject to Article 12A of Chapter 58 
and all applicab l e rule s . — The form include s the 
name — of regi s trant. — addre ss — and — ah — pertinent 
information as required in the form and must be 
si gned, certified and kept current in accordance 
with Article 12A and all applicab l e rule s . 



Statutory Authority G.S. 58-1 24. 2(h). 



.0449 



Th* 



SALE OF VARIABLE ANNUITY 
CONTRACTS IN NORTH CAROLINA 



ie requirements and procedure s tor sale ot 
variable annuity contract s in North Carolina is 



furnished 



irmshcd to companies seeking authority to write 
variable annuity contracts and contain s s tep by step 
procedures that must be followed in order for a 
company to have it s licen se amended to write 



variable — annuity — contract s — and — eontai 



«s — otnei 



pertinent information. 



Statutory Authority G.S. 58-79.2. 



2249 



7:20 



NORTH CAROLINA REGISTER 



January 75, 1993 



PROPOSED RULES 



.0452 THE FORM A: INSIDER TRADING 
OF EQUITY SECURITIES 

Those instructions are used a s a guideline for 

completion of the Form A Insider Trading of 

Equity Securities as de s cribed in 11 NCAC 1 1 A 
.0 4 5 4 . — These instructions include when the s tate 
i nent i s to be filed, where the statement is to be 
filed, identity of beneficial owner and other pcrti 
n e nt informat i on. 



Statutory Authority G.S. 58-86.2. 

.0453 FORM B: INSIDER TRADING OF 
EQUITY SECURITIES 

These instruction s are u s ed a s a guideline for the 

completion of the Form B Insider Trading of 

Equity Securitie s as described in 11 NCAC 1 1 A 
.0 4 55. The s e instructions contain the s tatement of 
changes — m — beneficial — owner s hip of s ecuritie s , 
insider trading of equity s ecurities, persons re 
quired to file the statement, when the statement is 
to be filed, where the statement i s to be filed and 
other pertinent information. 



Statutory Authority G.S. 58-86.2. 

.0454 INITIAL STATEMENT OF 

BENEFICIAL OWNERSHIP OF 
SECURITIES 

The Initial Statement of Beneficial Ownership of 

Securitie s Insider Trading of Equity Securitie s 

Form is prepared upon the initia l acquisition of 
beneficial ownership of the securities of a dome s tic 
stock insurance company. — Thi s form include s the 
name of the company, title of s ecurity, nature of 
ownership and other pertinent information. 

Statutory Authority' G.S. 58-86.2. 



.0455 STATEMENT OF CHANGES IN 
BENEFICIAL OWNERSHIP OF 
SECURITIES 

The Statement of Changes in Beneficial Owner 
ship of Securitie s — — In s ider Trading of Equity 
Securitie s Form is prepared when there are ehang 
e s in beneficial ownership of th e se curitie s of a 
dome s tic s tock in s urance company. — This form 
includes the name of the company, title of s ecuri 
ty. date of tran s action, and other pertinent infor 
mation. 



Statutory Authority G.S. 58-86.2. 

.0456 REVOCATION OR SUSPENSION OF 
LICENSE: FOREIGN INSURANCE 



The form of Notice of Revocation or Suspension 
of Licen s e of Foreign In s urance Company i s u s ed 
pursuant — te — the — provision s — of North — Carolina 
General Statute 5 8 37 for the revocation or s u s pen 
s ion of the licen s e of a foreign insurance company 
doing bu s ine ss in the State of North Carolina. The 
notice s ets forth the effective date of the revocation 
or suspension of the license, name and addr ess of 
the company together with the ba s i s for s uch 
action, in general term s , and the fact that no new 
business may be written by the company' s agent s 
in North Carolina until the company' s authority 
ha s been re s tored. 



Statutory Authority G.S. 58-37; 58-44. 4(a). 

.0457 OFFICIAL RECEIPT OF SECURITIES 

The Official Receipt of Securitie s i s prepared for 
all securities received by the Department of In s ur 
ance. The form includes, but is not limited to. the 
company's name, complete description of securi 
ties received and a certification by the Commi s 
sioner of Insurance that such securitie s have been 
received. 

Statutory Authority G.S. 58-182.6. 

.0460 TAXES AND FEES APPLICABLE TO 
INSURANCE COMPANIES 

The Schedule of Taxe s and Fee s Applicabl e to 
In s urance Companie s i s u s ed to s how the applica 
bio taxes and fees charged by this departm e nt. It is 
mailed to intere s ted partie s upon reque s t. — The 
form include s li cen s e foe s , premium taxe s , mi s cc l 
laneous fees, admi ss ion fee s for different types of 
insurance companies and other pertinent informa 
lion . 

Statutory Authority G.S. 58-62; 105-288.4. 



.0461 TOWN OR COUNTY FARM MUTUAL 
EXAMINATION REPORT BLANK 

The Town or County Farm Mutual Examination 
Report Blank is used as the examination report of 
a town or county farm mutual in s urance company 
and i s prepared by representative s of the Depart 
ment of In s urance following an examination of a 
town or county farm mutual in s urance company. 
The — form — includes — the — company's — name, 
company' s addres s , executive officers and board of 
director s of the company, financ i al information on 



Ibx 



ipany 



nd it s operation s , detailed s ehcdi 



re l ated thereto, general comment s r es ulting from 
the examination and other pertinent information. 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2250 



mnvrai ■ ■■innwumi 



PROPOSED RULES 



Statutory Authority G.S. 58-9(3); 58-16. 

.0462 CERTIFICATE OF COMPLIANCE: 
MUTUAL AGREEMENT 

The Certificate of Compliance Mutual Agree 

merit — hs — used — whenever an — in s urance company 
licensed in North Carolina has been required to 
appear and confer with departmental representa 
tives regarding the company' s financial condition 
or its operations. — The form includes a confirma 
tion of agreements reached during the conference, 
a cert i fication that the company agrees to comply 
with requirements found mutually agreeable during 
the conference, and other pertinent information. 



Health Advertising is prepared whenever a dome s 
tic company reque s t s a certificate of complianc e 
with accident and health advertising rules and laws 
of North Carolina. The form includes, but is not 
limited to. the company' s name, and a certification 
by the Commi ss ioner of Insurance that the adver 
ti s ement pertaining to accident and sickness insur 
anee — disseminated — by — the — domestic — in s urance 
company during the preceding annual statement 
years appear s to comply with the applicable provi 
sions of the insurance law s of the State of North 
Carolina. 



Statutory Authority G.S. 58-54.4. 



Statutory Authority G.S. 58-9(1 ). 

.0463 POWER OF ATTORNEY: SALE OF 
DEPOSITED SECURITIES 

The Power of Attorney Authorizing the Insurance 
Commissioner to — SeH — Securitie s — Depo s it e d — by 
Insuru 



-G 



North Carolina i s u s ed 



ompanies in 

when an insurance company i s required to place 
securities on deposit with the Commi ss ioner a s a 
result of cither its financial condition or it s general 
operating condition. Thi s form include s , but is not 
limited to. a signed statement by official s of the 
companv authorizing the Commis s ioner of In s ur 
anee as lawful attorney, to s ell and tran s f e r any 
s ecurities deposited or that may be deposited by a 
companv in North Carolina, for the protection of 
North Carolina policyholder s , a s far a s s uch s ale 
mav be necessary to pay any liability of the com 
panv when the Commissioner determine s that the 
company is unable to fulfill it s contractual obliga 
tions. 



Statutory Authority G.S. 58-9(3); 58-182.5. 

.0464 CERTIFICATE OF DEPOSIT 

The Certificate of Depo s it is prepared whenever 
t here i s a reque s t for a confirmation of the s ccuri 
tie s on depo s it with the Commis s ioner of In s ur 
anee. The form includes the company's name, full 
description of securities, the par value of securities 
and a certification of the deposit by the Commis 
s ioner of In s urance, together with other pertinent 
information. 



Statutory Authority G.S. 58-63.3. 

.0465 CERTIFICATE OF COMPLIANCE: 
ACCIDENT AND HEALTH 
ADVERTISLNG 

The Certificate of Compliance for Accident and 



.0466 CERTIFICATE OF RETALIATORY 
PROYISIONS 

T-fre — Certificate — ef — Retaliatory — Provisions — t* 
prepared whenever another s tate department of 
insurance requests a certified s tatement of require 
ment s of a foreign insurer to do business in North 



Caroli 



: arolina. — The form includes, but is not limited to. 
a certification by the Commis s ioner of In s urance 
that there arc attached brochure s and forms which 
s et forth all requirement s , admi ss ion fees and taxe s 
thM — would — be — applicable — te — a — foreign — insurer 
seeking admission to do business in North Caroli 
na. s imilar to a North Carolina insurance company 
which is now seeking admission to another state. 



Statutory Authority G.S. 58-9(3). 

.0467 CERTIFICATE OF GOOD STANDING 

The Certificate of Good Standing i s pr e pared any 
time a company requests a certification of its good 
s tanding in North Carolina. — Th e form includes. 



btrt- 



-ts — rtert — limited — te-, — me — company s — name, 
company's addres s . — the line s of bu s ine ss it i s 
authorized to write, and certification by the Com 
mi ss ioner of In s uranc e that the company has paid 
all tax es and fee s owing to thi s s tate and i s in good 
s tanding. 

Statutory Authority G.S. 58-9(3). 

.0468 CERTIFICATE OF SIMILARITY: 
REPORT ON EXAMLNATION 

The Certificate of Similarity Report on Exami 

nation is prepared whenever a domestic company 
reque s t s a certification a s to the s imilarity of a 
report on examination with the original report on 
examination on file with the Department of Insur 
anee. The form includes, but i s not limited to. the 
company's name, date of the report on examina 
tion and a certification bv the Commissioner of 



2251 



7:20 



XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Insurance that the copy of the report on oxamina 
tion ha s been compared with the original on file at 
the Department of Insurance and has been found to 
b e a correct copy of the whole said original. 

Statutory Authority G.S. 58-9(3). 

.0469 CERTIFICATE OF SIMILARITY: 
ANNUAL STATEMENT 

The Certificate of Similarity Annual Statement 

i s prepared whenever a dome s tic company requests 
a certification as to the similarity of an annual 
statement with the original annual s tatement on file 

with the Department of Insurance. The form 

includes. — bwt — is not limited to, the company's 
name, date of the annual statement and a ccrtifica 
tion by the Commissioner of In s urance that the 
copy of the annual statement has been compared 
with the original on file at the Department of 
Insurance and has been found to be a correct copy 
of the whole s aid original. 



Statutory Authority G.S. 58-9(3); 58-21. 

.0470 CERTIFICATE OF RESERVE 
VALUATION 

The Certificate of Reserve Valuation i s prepared 
whenever a domestic company requests a ccrtifica 



tion of the valuation of its re 



serves. 



The form 



inc l udes the company's name, cla ss ification of net 
value s for each class of reserves, a certification by 
the Commi ss ioner of In s urance, and other pcrti 
ncnt information. 



Statutory Authority G.S. 58-9(3); 58-201. 

.0471 CERTIFICATE OF COMPLIANCE: 
INSURANCE LAWS 

The Certificate of Compliance In s urance Law s 

i s prepared whenever a company requests a eertifi 
cation of its compliance with the insurance laws of 
North Carolina. The form include s the company's 
name, date of expiration of current license, cla ss es 
of bu s ine ss authorized to write, a certification by 
the Commissioner of Insurance and other pertinent 
information. 



Statutory Authority G.S. 58-9(3); 58-72. 

.0472 STAT INFORMATION: LIFE INS 
COMPANIES AND FRAT ORDERS 

Stati s tical — Information on the North Carolina 
Business of Life Insurance Companie s and Fratcr 
nal Order s i s prepared annually by the Department 
from the annual statements of all life insurance 



companies and fraternal — order s — licen s ed — to do 
business in the State of North Carolina. The form 
include s all licensed life in s urance companie s and 
fraternal orders, types and amounts of business 
written in North Carolina, lines of bu s ine s s written 
in North Carolina and other pertinent information. 



Statutory Authority G.S. 58-11. 

.0473 STAT INFO/FIRE AND 

CAS/RECIPROCALS/FACTORY/CO 
FARM 

Statistical — Information on the North — Carolina 
Busines s of Fire and Casualty, Reciprocals, Facto 
ry Mutuals and County Farm Mutual In s urance 



Companie s i s prepared annually by the Department 
from the annual s tatement of all fire and casualty, 
reciprocal, factory mutual and county farm mutual 
in s urance companie s licensed to do busine s s in the 
State of North Carolina. — The form includes all 



ed— ft 



and 



licensed — ftfe — aftd — ca s ualty. — reciprocal. — factory 
mutual and county farm mutual insurance eompa 
and amount s of business written in 



mes 



-*yp« 



North Carolina and other pertinent information. 



Statutory Authority G.S. 58-11. 



.0474 STATISTICAL INFORMATION: 

ACCIDENT AND HEALTH BUSINESS 

Statistical — Information on the North Carolina 
Accident and Health Bu s ine ss i s prepared annually 
by the Department from the annual statements of 
all in s urance companie s licensed to do accident 
and health insurance business in North Carolina. 
The form include s all licensed insurance compa 
nic s , accident and health — insurance by type of 
company, and accident and health premiums and 
lo ss e s from bu s ine s s in North Carolina and other 
pertinent information. 

Statutory Authority G.S. 58-11. 

.0475 AUTHORIZED INVESTMENTS 
PURSUANT TO G.S. 58-79(a) 
An Inventory of Authorized Investments is to be 
prepared annually by each company and should l ist 
investments — made — pursuant — te — North — Carolina 
General Statute 58 79(a) and as required by — 14- 
NCAC 1 IC .0302. The form develops the amount 
of inve s tment s which must be inve s ted pursuant to 
G.S. 58 70(a) and also lists the specific i nvest 
m e nt s which satisfy' that statutory requirement. 



Statutory Authority G.S. 58-79(a). 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2252 



PROPOSED RULES 



.0476 INVESTMENTS MADE PURSUANT 
TO G.S. 58-79(a)(14) 

An Inventory of Inve s tments is to be prepared 
annually — which — refleet s — the — inve s tment s — made 



North Cc 



Sfd — Statute 



pursuant — te — iNortn — I aroiina — oener 

58 79(ai(1 4 ) for the eurrent year, the authorized 

amount which was availabl e for s ueh investment 

during the eurrent year and an inventory of all 

"Basket — Clause" — inve s tments. — whenever — made 

whieh are still outstanding at the end of the eurrent 

vcar. 



Statutory Authority G.S. 58-79(a)(14). 

.0477 AUTHORIZED INVESTMENTS 
PURSUANT TO G.S. 58-79.1 

.An Inventory of Inve s tment s is to be prepared 
annually and s hould list authorized inv es tments 
made pursuant to North Carolina General Statute 
58 79.1 and as required by 1 1 NCAC 1 1C .0202. 
The — form develops th e amount of inve s tment s 
whieh mu s t be invested pursuant to North Carolina 
General Statute 58 79.1 and al s o li s t s the 



s peoitic 



inve s tments whieh satisfy that s tatutory require 
ment. 

Statutory Authority G.S. 58-79.1. 

.0478 CORPORATE RESOLUTION AND 
CONFLICT OF INTEREST 



Tht 



lis form of Corporate Resolution and Conflict 
of Intere s t Disclo s ure Statement is deemed accept 
able to the Department for complying with the 
requirements of 11 NCAC 11C .0117; however, 
any resolution or disclosure statement substantially 
in conformance with the provi s ions of this form 
will al s o be deemed acceptable to the Department. 



The form of Notice of Public Hearing on Plan 
of Exchange of Capital Stock is a guide for the 
preparation and publication of the notice of public 
hearing on a plan of exchange of capital stock 
pursuant to the provi s ions of NCGS 58 86. 4 . This 
form includes the time, date and location of the 
public hearing, the principal companies involved. 
the effect of the plan of exchange, the purposes for 
the public hearing and any other pertinent informa 
ttort . 



Statutory Authority G.S. 58-86.4. 

.0481 PUBLIC HEARING ON PLAN OF 
MERGER OR CONSOLIDATION 



4Ht 



The form of Notice of Public Hearing on Flan o 
Merger or Consolidation is a guide for the prepa 
ration and publication of the notice of a public 
hearing — on a plan or — merger or consolidation 
pursuant to the provisions of N.C.G.S. 58 155.1. 
The form include s the time, date and location of 
the public hearing, the principal companies in 
volved. the effect of the plan, the purposes for the 
public hearing and any other pertinent information. 



Statutory Authority G.S. 58-155.1. 

.0482 EXAMINERS" EXPENSE AND DAYS 
WORKED REPORTS 

The examiners' expense and days worked reports 
are u s ed by the insurance company examiners 
employed — by — the — Commissioner — fef — reporting 
expenses and days worked charges related to the 



examination of insurance com 



panic 



together with 



other pertinent information. 



Statutory Authority G.S. 57-10; 58-16: 58-63(3). 



Statutory Authority G.S. 58-9(1). 

.0479 CONTRIBUTION FOR DOMESTIC 
INSURANCE COMPANIES 

The form of Certificate of Contribution i s for 
domestic insurance companie s i ss uing certificate s 



& 



f contribution under the 



-pre- 



vt 



s ion s of 1 1 NCAC 



I 1C .01 1 4 . — This form includes the names of the 



iss uing company and the contributing corporation. 
the term s and condition s of the certificate and any 
limitations or re s triction s thereof, and other perti 
nent information. 

Statutory Authority G.S. 58-9; 58-79; 58-79.1. 

.0480 PUBLIC HEARING ON PLAN OF 
EXCHANGE OF CAPITAL STOCK 



.0483 STATEMENT OF EXAMINATION 
CHARGES 

The Statement of Examination Charges is used 
by the Department of In s urance in billing compa 
for examination expenses and days worked 



nic s tor cxaminuuon expense s anu stays vvoiiiei 

charge s . The — form include s the name of the 

company, period covered by the billing, amount of 
bill and other pertinent information. 

Statutory Authority G.S. 57-10; 58-16; 58-63(3). 

.0484 FORM OF MODEL CUSTODIAL 
AGREEMENT 

The form of Model Cu s todial Agreement i s u s ed 
by the department as a guideline and is furnished 
upon request to domestic companie s wishing to 
establish a custodial agreement with a banking 



2253 



7:20 



XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



institution. The form include s the term s and 

conditions under which securities will be held and 
sets forth the safeguards of the arrangements. 

Statutory Authority G.S. 58-79; 58-79.1. 

. 0485 FORM OF MODEL CUSTODIAL AND 
FISCAL AGENCY AGREEMENT 

The form of Model Custodial and Fiscal Agency 
Agreement i3 used by the Department as a guide 
line and is furnished upon reque s t to dome s tic 
companies — wishing to establish a custodial and 
fiscal agency agreement with a banking institution. 
The form includes the term s and conditions under 
which securities will be held and sets forth the 
safeguards of the arrangement. 

Statutory' Authority G.S. 58-79; 58-79.1. 



.0486 RECONCILIATION: STATUTORY 
CAPITAL AND STOCKHOLDERS 
EQUITY 

The form of Reconciliation Between Statutory 
Capital and Surplus and Stockholders Equity is 
used by life insurance companie s for financial 
reporting on the basis of a differing financial 
statement in accordance with G.S. 58 3 4 .1 and as 
required by 11 NCAC HE .0307. 

The — form — includes — a — reconciliation — between 
s tatutory — capital — and — surplus — and — stockholders 
equity based on statutory accounting principles and 
on generally accepted accounting principl es . 

Statutory Authority G.S. 58-34.1. 

.0487 RECONCILIATION: STATUTORY 
NET GAIN AND NET INCOME 



i s u s ed by insurance companie s and the Depart 
ment of Insurance to determine the admissible 



The for 



)rm of R e conciliation Between Statutory 
Net Gain From Operation s and Net Income is used 
by life insurance companies for financial reporting 
and the basi s of a differing financial statement in 
accordance with G.S. 58 3 4 .1 and as required by 
11 NCAC HE .0307. 



The — form 



includes — a — reconciliation — between 
statutory net gain from operation s and net income 
based on statutory accounting principles and on 
generally accepted accounting principle s . 



Statutory Authority G.S. 58-34. 1. 

.0488 VALUATIONS OF SECURITIES 
MANUAL 

The Valuations of Securities Manual prepared 
annually by the s ecurities valuation office of the 
National As s ociation of Insurance Commi ss ioner s 



values of the companie s investments in s e curitie s 
at each calendar year end. 

The manual includes but i s not limited to associa 
tion values, procedures for valuing bond s , proce 
durcs for valuing preferred stock s , procedures for 
valuing common stocks and warrants or options, 
in s tructions for calculating the mandatory s ecuri 
tics valuation reserve for life in s urance companie s 
and fraternal benefit s ocieties and in s tructions to 
companie s on preparing annual statements. 



Statutory Authority G.S. 58-9(1). 

.0489 AFFIDAVIT FOR RETURN OF 
DEPOSIT 

The form. Affidavit For Return of Deposit, is 
used by all companie s for requesting return of 
deposit. This form must contain but is not limited 



to the following information: 

fH name of company. 

{3} disposition of North Carolina business. 

f^j status of the company, 

(4) amount and type of business remaining in 

North Carolina, 

date of withdrawal. 






such other information as the Commis 
sioner may require. 



Statutory Authority G.S. 58-9. 

.0490 APPLICATION FOR LICENSE: 
HEALTH MAINTENANCE 
ORGANIZATION 

The — "Application for Licen s e — Health Mainte 
nance Organization" is prepared annually for the 
renewal license or initial licen s e of health mainte 

nance — organizations. The — form — include s — the 

company's name, company' s addre ss , president 
and s ecretary of the company, a schedule of fee s 
payable and other pertinent information. 

Statutory Authority G.S. 57A-3; 57A-4; 57A-21. 

.0491 HEALTH MAINTENANCE 
ORGANIZATION: ANNUAL 
STATEMENT 

The "Health Maintenance Organization — Annual 
Statement Blank" i s u s ed by h e alth maintenance 
organizations which are required to report to the 
Commis s ioner annually. — The form includes the 
company' s name, company's addre ss , executive 
officers and board of director s of the organization, 
financial information on the organization and it s 



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January 15, 1993 



2254 



PROPOSED RULES 



operations, detailed schedule s related thereto and 
other pertinent information (sec form referred to in 
1 1 NCAC 1 1 A .0 4 58 for instructions for eomplet 
ing this annual statement). 



Statutory Authority G.S. 57A-9; 57A-21. 

.0492 INSTRUCTIONS FOR COMPLETING 
STATEMENT 

These instruction s are u s ed by health mainte 
nance organizations which are required to report to 
the Commi s sioner on the — "Health — Maintenance 
Organization — Annual Statement Blank." The form 



includes general instructions and s pecific in s true 
tion s for lines and item s about which there might 
be some question s a s to content (see form referred 
to in 1 1 NCAC 11 A .0 4 91). 



Statutory Authority G.S. 57 A. 

.0493 HEALTH MAINTENANCE 

ORGANIZATION: QUARTERLY 
STATEMENT 

The "Health Maintenance Organization Quarterly 
.Statement" — bs — u s ed — bv — *H — health — maintenance 
organizations which complete the "Health Mainte 
nance Organization Annual Statement Blank" and 
which are required to report to the Commissioner 

©fl — a quarterly — basis. The — form — includes — the 

company's name, company's address, executive 
officer s and board of director s of the company. 
financial — information — ©B — the — company — and — its 
operations, schedules related thereto and other 
pertinent information (see forms referred to in 
.0 4 01 and .0 4 92 of thi s Section). 



Statutory Authority G.S. 57A-9; 57A-21. 
SECTION .0500 - CPA AUDITS 

.0501 PURPOSE AND SCOPE 

(a) The purpose of this Section is to improve the 
Department's surveillance of the financial condi- 
tion of insurers by requiring an annual examination 
by CPAs of the financial statements reporting the 
financial condition and the results of operations of 
insurers. 

(b) This Section applies to all insurers; provided 
that insurers having direct premiums written in 
North Carolina of less than two hundred fifty 
thousand dollars ($250,000) in any year and 
having less than 500 policyholders in North Caro- 
lina at the end of any year are exempt from this 
Section for such year unless the Commissioner 
makes a specific finding that compliance is neces- 



sary for the Commissioner to carry out statutory 
responsibilities. Insurers must notify the Depart- 
ment on or before May JO of each year of their 
exempt status. 

(c) Foreign insurers filing audited financial 
reports in another state, pursuant to such other 
state's requirement of audited financial reports are 
exempt from this Section if: 

(1) A copy of the Audited Financial Report 
and Report on Internal Control Struc- 
ture Related Matters noted in an audit 
are filed with such other state. 

(2) A copy of any Notification of Adverse 
Financial Condition Report filed with 
such other state is filed with the Com- 
missioner within the time specified by 
such other state. 

This Section does not prohibit, preclude, or in any 
way limit the Commissioner from ordering, con- 
ducting, or performing examinations of insurers 
under the General Statutes or this Title. 

Statutory Authority G. S. 58-2-40; 58-2-205. 

.0502 DEFINITIONS 

As used in this Section: 

(1) "Audited Financial Report" means those 
items specified in 11 NCAC 1 1 A .0504. 

(2) "Commissioner" means the Commission- 
er of Insurance of North Carolina or his 
authorized representative. 

(3) "CPA" means an independent certified 
public accountant or accounting firm in 
good standing with the American Institute 
of Certified Public Accountants and in all 
states in which they are licensed to prac- 
tice. 



<4h 



^©e 



)epartmcnt" means the North Carolina 
D e partment of In s urance. 
(4) f5) "Insurer" means any insurance entity 
as identified in Articles 7, 15, 16, _17. 65 
and 67 of Chapter 58 of the General 
Statutes and regulated by the North Caro 
lina Department — of Insurance Depart- 
ment . 

Statutory Authority G.S. 58-2-40; 58-2-205. 

.0503 FILTNG AND EXTENSIONS FOR 
FILLNG REPORTS 

(a) All insurers shall have an annual audit by a 
CPA and shall file an audited financial report with 
the Commissioner on or before May 10 for the 
previous calendar year. Two copies of this report 
shall be filed in the office of the Chief Examiner. 



22 



255 



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PROPOSED RULES 



Field Audit Section of the De partment. 

(b) An extension of the May 10 filing date may 
be granted by the Commissioner for a period of up 
to 45 days upon a showing by the insurer and its 
CPA of the reasons for requesting such extension 
and a determination by the Commissioner of good 
cause for an extension. The request for extension 
must be submitted in writing not less than 15 days 
prior to the due date and must be in sufficient 
detail to permit the Commissioner to make an 
informed decision with respect to the requested 
extension. 

Statutory Authority G.S. 58-2-40; 58-2-205. 

.0505 DESIGNATION OF CPA 

(a) Each insurer required by this Section to file 
an annual audited financial report must within 60 
days after becoming subject to such requirement, 
register with the Commissioner in writing the 
name and address of the CPA retained to conduct 
the annual audit set forth in this Section. Insurers 
not retaining a CPA on the effective date of this 
Section shall register the name and address of their 
retained CPA not less than two months before the 
date when the first certification is to be filed. 

(b) The insurer shall obtain a letter from such 
CPA, and file a copy with the Commissioner 
stating that the accountant is aware of the provi- 
sions of the North Carolina General Statutes and 
Administrative Code that relate to accounting and 
financial matters and affirming that he will express 
his opinion on the financial statements in the terms 
of their conformity to the statutory accounting 
practices prescribed or otherwise permitted by the 
Department, specifying such exceptions as he may 
believe appropriate. In addition, the CPA must 
affirm that he is aware of and will comply with the 
provisions of 1 1 NC AC 1 1 A .05 1 1 . 

(c) If a CPA who was not the CPA for the 
immediately preceding filed audited financial 
report is engaged to audit the insurer's financial 
statements, the insurer shall within 30 days of the 
date the CPA is engaged notify the Department of 
this event. The insurer shall also furnish the 
Commissioner with a separate letter stating wheth- 
er in the 24 months preceding such engagement 
there were any disagreements with the former CPA 
on any matter of accounting principles or practic- 
es, financial statement disclosure, or auditing 
scope or procedure, which disagreements, if not 
resolved to the satisfaction of the former accoun- 
tant, would have caused him to make reference to 
the subject matter of the disagreement in connec- 
tion with his opinion. The insurer shall also in 



writing request such former CPA to furnish a letter 
addressed to the insurer stating whether the CPA 
agrees with the statements contained in the 
insurer's letter, and, if not, stating the reasons for 
which he does not agree; and the insurer shall 
furnish such responsive letter from the former 
CPA to the Commissioner together with its own. 

Statutory Authority G. S. 58-2-40; 58-2-205. 

.0506 QUALIFICATIONS OF 
INDEPENDENT CPA 

(a) The Commissioner shall not recognize any 
person or firm as a CPA that is not in good stand- 
ing with the American Institute of Certified Public 
Accountants and in all states in which the CPA is 
licensed to practice. 

(b) Except as otherwise provided in this Section, 
a CPA shall be recognized as independent as long 
as he or she conforms to the standards of his or 
her profession, as contained in the Code of Profes- 
sional Ethics of the American Institute of Certified 
Public Accountants and Rules and Regulations and 
Code of Ethics and Rules of Professional Conduct 
of the North Carolina Board of Public Aceountan 
ey State Board of Certified Public Accountant 
Examiners , or similar code. 

(c) The Commissioner may hold a hearing to 
determine whether a CPA is independent and, 
considering the evidence presented, may rule that 
the CPA is not independent for purposes of ex- 
pressing h+s an opinion on the financial statements 
in the annual Audited Financial Report made 
pursuant to this Section and require the insurer to 
replace the CPA with another whose relationship 
with the insurer is independent within the meaning 
of this Section. 

Statutory Authority G.S. 58-2-40; 58-2-205. 

.0507 APPROVAL OF CPA 

(a) CPAs that practice pursuant to the provisions 
of this Section must file their intentions of such 
with the Department within 60 days of the effec- 
tive date of this Section and thereafter by January 
4 October 1 of each year. The Department may 
reject such filing if the CPA does not meet its 
requirements. Inclusive within this filing must be 
evidence of the CPA's expertise in the areas of 
insurance auditing and insurance accounting. Such 
evidence must also demonstrate expertise in the 
areas of insurance auditing and insurance account- 
ing for the staff assigned to the audit. In addition, 
the CPA must affirm that he is aware of and will 
comply with the provisions of J_L NCAC 1 1 A 



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January 15, 1993 



2256 



PROPOSED RULES 



.051 



(b) The CPA may be deemed to be experienced 
in the areas of insurance auditing and accounting 
if the office filing with the Department pursuant to 
this Section has existing audit clients in the insur- 
ance industry. 

(c) The staff assigned to an audit pursuant to 
this Section may be deemed to be experienced in 
the areas of insurance auditing and accounting as 
follows: 

( 1 ) Managerial staff that has been assigned 
or has had responsibility for audit 
engagements in the insurance industry 
in an amount averaging at least 30 
percent of their chargeable time during 
the last three years. 

(2) Non-managerial staff that has been 
assigned or has had responsibility for 
audit engagements in the insurance 
industry in an amount averaging at least 
15 percent of their chargeable time 
during the last three years or during 
their period of employment if employed 
less than three years. 

(d) An audit performed by a CPA pursuant to 
this Section shall be staffed by managerial staff 
experienced in the areas of insurance auditing and 
accounting and by majority or equal 
non-managerial staff experienced in the areas of 
insurance auditing and accounting. 

(e) As used in this Section, insurance includes 
financial services. 

Statutory Authority G.S. 58-2-40; 58-2-205, 

.0508 SCOPE OF EXAMINATION AND 
REPORT OF CPA 

Financial statements furnished pursuant to 1 1 
NCAC 1 1 A .0504 shall be examined by a CPA. 
The examination of the insurer's financial state- 
ments shall be conducted in accordance with 
generally accepted auditing standards and such 
other procedures illustrated in the Financial Condi- 
tion Examiner's Handbook promulgated by the 
National A ss ociation of Insurance Commissioners 
as the CPA deems to be necessary NAIC . The 
Commissioner may, from time to time, prescribe 
that additional auditing procedures be observed by 
the CPA in the examination of the financial state- 
ments of insurers pursuant to this Section. 

Statutory Authority G.S. 58-2-40; 58-2-205. 

.0510 INTERNAL CONTROL STRUCTURE 
RELATED MATTERS 



(a) In addition to the annual Audited Financial 
Report, each insurer shall furnish the Commission- 
er with two copies of a report of matters noted in 
an audit related to the internal control structure. 

(b) A report of the evaluation by the CPA of the 
accounting procedures of the insurer and its system 
of internal control, including any remedial action 
taken or proposed, shall be filed annually by the 
insurer with the Department at the time of the 
filing of the annual Audited Financial Report. 

(c) Such report shall follow the Form for Re- 
ports on Internal Control Structure Related Matters 
Noted in an Audit described in Volume 1, Section 
AU 325, of the Professional Standards of the 
American Institute of Certified Public Accountants. 

Statutory Authority G.S. 58-2-40; 58-2-205. 

.0511 CPA WORKPAPERS 

(a) Workpapers are the records kept by the CPA 
of the procedures followed, the tests performed, 
the information obtained, and the conclusions 
reached pertinent to his examination of the finan- 
cial statements of an insurer. Workpapers, accord- 
ingly, may include work programs, analyses, 
memoranda, letters of confirmation and representa- 
tion, abstracts of company documents and sched- 
ules, or commentaries prepared or obtained by the 
CPA in the course of his examination of the 
financial statements of an insurer and that support 
his opinion thereof. 

(b) Every insurer required to file an Audited 
Financial Report pursuant to this Section, shall 
require the CPA (through the insurer) to make 
available for review by Department examiners, the 
all workpapers prepared., or legible copies thereof. 
in the conduct of his examination. The completed 
workpapers and any written communications 
between the CPA and the insurer relating to the 
audit of the insurer shall be made available for 
review by the Department examiners at the offices 
of the insurer, at the Department, or at any other 
reasonable place a s mutually agreed between the 
Department and the insurer. The insurer shall 
require that the CPA retain the audit workpapers 
for a period of not less than five years after the 
period reported thereon. 

(c) In the conduct of any periodic review by the 
Department examiners, photocopies of pertinent 
audit workpapers may be made and retained by the 
Department. 

Statutory Authority G.S. 58-2-40; 58-2-205. 

.0513 EXAMINATIONS 



2257 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



(a) The Commissioner shall determine the 
nature, scope, and frequency of examinations 
under this Section conducted by department exam- 
iners pursuant to G.S. 58 2 130 the Examination 
Law . Such examinations may cover all aspects of 
the insurer's assets, liabilities, condition, affairs, 
and operations; and may include and be supple- 
mented by audit procedures performed by CPAs as 
provided in this Section. The type types of exami- 
nations under the provisions of this Section per- 
formed by department examiners after the effective 
date of this Section shall be as follows: 

(1) Comprehensive examinations will be 
performed when in the judgement of the 
Commissioner a complete examination 
of the condition and affairs of the insur- 
er is necessary. 

(2) Compliance examinations may consist 
of a review of the accountant's 
workpapers defined under 1 1 NCAC 
1 1A .051 1 and a general review of the 
insurer's corporate affairs and insurance 
operations to determine compliance 
with the North Carolina General Stat- 
utes and this Title. The examiners may 
perform alternative or additional exami- 
nation procedures to supplement those 
performed by the CPA when the exam- 
iners determine that such procedures 
are necessary to verify the financial 
condition of the insurer. 

(3) Targeted examinations may cover such 
areas as life reserve valuations, claims 
analyses, organizational and capital 
changes, and such other areas as the 
Commissioner deems to be appropriate. 

(b) Upon completion of each examination 
described in this Rule, the examiner appointed by 
the Commissioner shall make a full and true report 
on the results of the examination. Each report 
shall include a general description of the audit 
procedure s performed by the Department oxamin 
ers and the procedure s of the CPA that the exam 
iner s may have utilized to supplement their exami 
nation procedures and the procedures that were 
performed by the CPA if included a s a s upplement 
to the examination as provided in this Section. 



Statutory Authority G.S. 58-2-40; 
58-2-132; 58-2-133; 58-2-205. 



58-2-131; 



SUBCHAPTER 11B - SPECIAL PROGRAMS 
SECTION .0100 - SECURITIES 



.0101 DEPOSITS OF MULTIPLE LINE 
INSURER 

When determining the amount of deposit for 
multiple line in s urer apply the formula for North 
Carolina — General — Statute — 58 182 — f-&f — fke — aft# 
marine lines and apply the formula for North 
Carolina General Statute 58 182.1 for casualty, 
fidelity and surety lines, then add the two amounts 
together to arrive at correct deposit for a multiple 
line in s urer. — Th e above procedure establi s hes the 
minimum deposit requirements for multiple line 
in s urer s ; however, multiple line insurers may b e 
required to — exceed — the — minimum — requirements 
when s uch companies become subject to other 
applicable rule s . 



Statutory Authority G.S. 58-9(1); 58-182; 
58-182(1). 



.0102 DEPOSITS: LIFE COMPANIES FOR 
ADMISSION 

Where an applicant insurer voluntarily consents 
to a depo s it of an amount as prescribed by the 
Commi ss ioner of In s urance, the type s of eligibl e 
securit i es to be used in a deposit of this nature for 
the sole protection of North Carolina policyholders 
are a s follow s : 

{+) United States Government Bond s ; 

Q) Bonds of the State of North Carolina or 

it s countie s or cities; 
Certificates of deposit of building and 



e 



m- 



loan a ss ociation s , or bank s situated in the 
State of North Carolina; 

(4) Double A or better corporate rated bond s 

on a ca s e by ca s e basi s . 

Statutory Authority G.S. 58-9(1). 



.0103 



Wbt 



DEPOSIT BY INSURANCE COMPANY 
WAIVER OPERATIONAL GAIN 



-fef 



tcnever the three year operational gain Tor a 
foreign insurance company applying for admission 
to North Carolina i s waived pur s uant to 1 1 NCAC 
1 4 .0207 and .0208. et seq.. the applicant compa 
ny will be required to plac e on d e posit with the 
Commissioner, for the sole protection of North 
Carolina policyholder s securitie s in the amount of 
one hundred thousand dollars ($100,000) of the 
following eligible se curities: 



H+- 



United State Government Bonds; or 



m- 



& 



Bonds of the State of North Carolina, or 
of its countie s or citie s ; or 



Certific 



ertiticate s or depo s it 
loan associations, or banks s 
State of North Carolina. 



for build 



and 



llciin^ 
i tuated in th 



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January 15, 1993 



2258 



PROPOSED RULES 



This deposit requirement is in addition to any other 
deposit required under any other statute or rule. 

Statutory Authority G.S. 58-150; 58-182. 7. 

.0105 PURPOSE OF DEPOSIT OF 
GENERAL OR SPECIAL 

All deposit s of foreign insuranee companie s s hall 
he held in tru s t for the protection of North Caroli 
na policyholders only and shall be designated as a 
special deposit. All d e posits of domestic insuranee 
companies shall be held in tru s t for the protection 
of all policyholder s wherever situated and shall be 
designated as a general deposit, — except — where 
otherwi s e noted. 



Statutory Authority G.S. 58-182.4. 

.0107 DEPOSITS OF DOMESTIC 
COMPANIES 

iky- 



All domestic fire and casualty companies s hall be 
required to make and maintain deposits under the 
provisions of G.S. 58 182 to 58 182.7 inclusive. 
As well a s any other rules regarding deposits as 
developed by the N.C. Insurance Commission. 

Statutory Authority G. S. 58-182 through 58-182. 8. 

.0108 RIGHT OF COMPANY TO RECEIVE 
INTEREST 

The right of a company to receive earned interest 
from the securities on deposit in this state shall be 
extended to all deposits made under all rules of the 
Department of Insurance and the right of the 
Department to withhold interest in accordance with 
G.S. 58 183 58-5-60 shall also extend to all such 
deposits. Interest checks from issuing agents or 
institutions on bonds, notes, debentures or other 
securities on deposit shall be forwarded to the 
master trust bank. The interest shall be transmit- 
ted to the insurance company in a manner as 
detailed by the N.C. Department of Insurance and 
the Master Trust Bank. 

Statutory Authority G.S. 58-2-40; 58-5-1; 58-5-60. 

.0109 RIGHT OF THE COMMISSIONER TO 
RECEIVE AND HOLD INTEREST 

The Commissioner may in his discretion receive 
and retain the interest on deposits of a company 
licensed in North Carolina which is placed in 
conservatorship, rehabilitation or receivership by 
its state of domicile, and where the Commissioner 
of In s urance has reason to believe that such com- 
pany may potentially be unable to meet its claims 



obligation in North Carolina. Such interest will be 
placed in an interest-bearing account at the master 
bank account and will be held in trust by the 
Commissioner for policyholders of the company » 
North Carolina . 

Statutory Authority G. S. 58-2-40; 58-5-60; 58-183. 

.0110 SALE OF DEPOSIT FOR PAYMENT 
OF LIABILITIES 

Any company licensed in this state and refusing 
to pay a claim of a North Carolina resident, after 
such claim has been reduced to a final judgment 
and no appeals are outstanding, shall be subject to 
this Rule. The parties due the claim shall ask the 
commissioner to sell such deposit of securities as 
needed to pay claims plus all expenses involved in 
settling such claim. It is understood that such sale 
will be done by our master trust bank as further 
defined under R«4e 11 NCAC 1 IB .0131. The 
procedure for this sale is as follows: 

( 1 ) The claimant must inform the company 
or its North Carolina agent in writing 20 
days in advance of his intentions to peti- 
tion the Commissioner for sale of bonds. 

(2) After receiving the petition from the 
claimant the Commissioner shall adver- 
tise in a daily paper in Raleigh at least 30 
days before the sale. Such advertising 
shall include, as a minimum, the follow- 
ing information: 

(a) securities to be sold, 

(b) company having the deposit, 

(c) the law under which these securities are 
being sold. 

The Commissioner will notify the company after 
the deposit has been sold, replace the deposit in an 
amount deemed to be adequate and reasonable by 
the Commissioner. The right of the commissioner 
to sell at public auction such amount of the securi- 
ties on deposit with him as is necessary to pay an 
outstanding liability of a company as provided by 
North Carolina General Statute 58 18 4 G.S. 
58-5-65 shall extend to all deposits made under all 
rules of the Department of Insurance . 

Statutory Authority G.S. 58-2-40; 58-5-1; 58-5-65. 

.0113 DEPOSIT REQUIRED UPON INITIAL 
LICENSING 

Any company seeking admission to this state 
which is required to deposit securities with this 
state shall deposit such securities within 99 30 
days after its license is granted. 



2259 



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PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-5-5; 58-5-10; 
58-5-50. 



.0116 SURETY BOND IN LIEU OF DEPOSIT 
OF SECURITIES 

Fire and casualty companies wishing to file a 
surety bond in lieu of a deposit of s ecuritie s a s 
provided for in G.S. 5 8 188.8 shall do so by using 
a "Deposit Bond" form as described in 1 1 NCAC 
1 1 A .0 4 10. — The surety bond must be issued by a 
company licensed to do business in North Caroli 

ftftr 



Statutory Authority G.S. 58-188.8. 



.0117 SURETY BOND IN LIEU OF DEPOSIT 
OF SECURITIES 

In addition to 11 NCAC 1 IB .0116 the Depart 
ment requires that every company — licen s ed — m 
North Carolina and using a surety bond in lieu of 
a deposit of securities must provide this depart 
ment — annually — a — pa+d — receipt — ©f — continuation 
certification providing the following information: 

iA-j premium paid by the principal to the 

surety company for procurement of the 
bond, 

(2) bond number. 

0j company making the premium payment. 



m- 



tino 

amount of bond. 



Tht 



tformati 



to be filed in the office of the 



is information i s to be tiled in tne ornce or tnc 
Commissioner of In s urance on or before the 15th 
day of March of each year. 

Statutory Authority G.S. 58-188.8. 

.0118 SURETY BONDED LIEU OF DEPOSIT 
OF SECURITIES: NOT ALLOWED 

Any company licensed in North Carolina which 
is — required to — make a depo s it — pursuant to — 14- 
NCAC 1 1 B .0106 shall not be allowed to use a 
s urety bond to comply with the requirement s of 
that rule. 



merged company. If the merging company wa s a 
domestic company, then ita deposit s hall be redes 
ignated from a general deposit for the protection of 
all policyholders to a special deposit for the pro 
tcction of North Carolina policyholders only and 
transferred to the account of the surviving compa 



Statutory Authority 
58-5-55. 



G. S. 58-2-40; 58-5-40; 



.0121 SURETY BONDS: DEPOSIT OF 
SECURITIES: SPECIAL 
REQUIREMENT 

Fire and casualty companies wishing to file a 
s urety bond in lieu of a deposit of securities as 
provided in G.S. 58 188.8, and where permitted 
under this Code, arc not allowed to execute a 
surety bond on behalf of a surety company wher e 
both the s urety and principal arc members of the 
same group of companies regardless of whether 
both the principal and surety operate on a different 
plan or organization. 

Statutory Authority G.S. 58-188.8. 



.0131 MASTER TRUST EVSOLVENT 
COMPANIES 

All interest from securities on deposit will be 
deposited in an interest bearing account at the 
Master Trust Bank to be transferred to the STIF 
Fund maintained by the Department of In s urance 
Budget Office . This action will occur after receipt 
of a court order declaring the insurance company 
to be insolvent. Also at this time the principal will 
be sold by the Master Trust to the best bidder 
from a field of at least two bids. It is conclusively 
presumed that the sale of securities to the best 
bidder from a field of two bids will constitute a 
public sale. 

Statutory Authority G.S. 58-2-40; 58-5-1; 58-5-5; 
58-5-10; 58-5-50. 



Statutory Authority G.S. 58-9(1). 

.0119 CONTINUATION OF DEPOSITS OF 
SECURITIES OF MERGING 
COMPANIES 

The deposits of securities of a licensed company 
which is merged into another company may, in the 
discretion of the Commissioner, be transferred to 
the account of the surviving company; thus in- 
creasing the original deposit of the surviving 
company by the amount of the deposit of the 



.0132 DEPOSIT REQUIRED AMOUNT 
FOREIGN LIFE EMSURERS 

AH — foreign — Itfe — in s urance — companies — being 
licensed in North Carolina must make and main - 
tain a deposit of securitie s in accordance with the 
Department of Insurance Admission Data Guide 
line s from 1 1 NCAC 1 4 .01 4 3. Such deposit must 
be made in accordance with the Master Trust 
Agreement between the Department of Insurance 
and a bank in North Carolina. 



7:20 



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January 15, 1993 



2260 



PROPOSED RULES 



Statutory Authority G.S. 58-7.5; 58-9. 

.0143 MASTER TRUST PURPOSE OF 
DEPOSIT 

It is understood thnt all deposits arc held for the 
protection of North Carolina policyholders where 



soever 



situated — in cas 



of dome s tic — in s urance 



companies and for the protection of North Carolina 
policvholdcr s only in cases of foreign insurance 



companies. 



The de s ignation — w+H — be a ss umed 



unle ss the deposit is otherwise indicated by thi 
North Carolina Commissioner of Insurance. 

Statutory Authority G.S. 58-7.5; 58-9; 58-82.4. 

SECTION .0200 - INSURANCE HOLDING 
COMPANY SYSTEMS 



the insurer, the Commissioner shall apply for an 
order in accordance with the provisions of North 
Carolina General Statute 58 12 4 .7 enjoining such 
insurer from violating or continuing to violate the 
aforementioned section. 



Statutory Authority G.S. 58-1 24.3(c). 



.0204 MATERIALITY" 



Nt 



re — information — regarding — s ale s . — purcha s e s , 
exchanges, loans, or extensions of credit or invest 
ments need be di s clo s ed on the registration state 
ment filed pursuant to G.S. 58 12 4 .2 invoking 
less than one half of one percent of an insurer's 
admitted assets of two hundred thousand dollars 



($200. 000). whichever is the 



:r. as of the 31st 



day of December next preceding the transaction. 



.0202 REGISTRATION: STATEMENT OF 
APPLICABILITY OR EXEMPTION 

Every insurer licensed in North Carolina must 
file with the Department of Insurance on e of the 
following certified statements: 



m- 



m- 



m- 



un exemption statement — indicating that 
insurer is not a holding company system 
as defined in G.S. 58 12 4 .1; 
a statement indicating that the insurer has 
f+kd — a — holding — company — registration 
statement with it s state of domicile under 
an insurer holding registration and di s clo 
s ure act substantially s imilar to the North 
Carolina act. and that all amendments to 
such statement arc kept current with the 
s tate of domicile; 

a holding company regi s tration statement 
completed in accordance with 1 1 NCAC 
1 1 B .0205 to .0210 on the form designat 
1A .0 44 8. (Form 



ed as 1 1 NCAC 



frC- — In s urer Holding Company Registra 
tion Statement) 

Statutory Authority G.S. 58-124.1. 

.0203 DIVIDENDS: DISTRIBUTIONS LN 
VIOLATION OF G.S. 58-124.3(c) 



At 



my extraordinary dividend or any other extraor 
dinary distribution of cash or other property which 
is made in violation — of the provisions and limita 

tion s ef- — North Carolina — General Statute 

58 12 4 .3(e) shall be invalid and the transaction 
effecting s uch dividend or di s tribution s hall be 
rever s ed on the books and record s of the in s urer 
and all cash or property shall be restored to the 
name of the insurer. 
If such tran s action i s not voluntarily reversed by 



Statutory Authority G.S. 58-124.2. 

.0205 REGISTRATION: REQUIREMENT 
AND FORM 

An insurer required to register with the Commis 
sioncr pursuant to G.S. 58 12 4 .2 shall furnish the 
required information on Form HC — Insurer Hold 
ing Company Registration Statement designated as 
11 NCAC 11A .0 44 8. The Form HC is intended 
to be a guide in the preparation of the regi s tration 
s tatement s . — It i s not intended to be a blank form 
which i s to be filled in. — The s tatements filed s hall 
contain the numbers and captions of all item s , but 
the text of the items may be omitted provided the 
an s wer s thereto are s o prepar e d as to indicate to 
the reader the coverage of the item s without the 
necessity of his referring to the text of the items or 
the in s truction s thereto. — All in s truction s , whether 
appearing under the items of the form or elsewhere 
therein, are to be omitted. Unless expressly pro 
vided otherwise, if an item is inapplicabl e or the 
answer thereto is in the negative, an appropriate 
statement to that effect shall be made. 



Statutory Authority G.S. 58-124.6. 

.0206 COPIES: SIZE AND FORM OF FORM 
HC 

fa-> — Copie s of Form HC. — The signed original 
and one s igned copy of Form HC including exhib 
its and all other papers and document s filed a s a 
part thereof s hall be filed with the Commissioner 
by personal delivery or mail addressed: 
Commissioner of In s urance 
State of North Carolina 
Raleigh. North Carolina 
fb-) — Size of Form HC. — Statement s s hould be 



2261 



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XORTH CAROLIXA REGISTER 



January 15, 1993 



PROPOSED RULES 



prepared on paper 8 1/2" x 1 1 " or 8 1/2" x 13" in 
size and preferably bound at the top or the top 



left hand corner. 



Exhibit s and financial state 



ments, unless specifically prepared for the filing, 
may be submitted in their original size. All copies 
of any statement, financial statements, or exhibits 
shall be clear, easily r e adable and s uitable for 

photocopying. Debits in credit categori es and 

credits in debit categories s hall be designated so as 
to be clearly distinguishable a s s uch on photocop 
ies-: — Statements s hall be in the Engli s h language 
and monetary values shall be stated in United 
States currency. — If any exhibit or other paper or 
document filed with the statement is in a foreign 
language, it shall be accompanied by a tran s lation 
into the English language and any monetary value 



shown in a 



-4ef* 



ign currency 
into United States currency. 



s hall be converted 



Information contained — m — any — financial 



fe) — Forms; — Incorporation by Reference, Sum 
maries and Omissions. Information required by 
any item of Form HC may be incorporated by 
reference in answer or partial an s wer to any other 
item. 

statement, annual report, proxy statement, state 
ment filed with a governmental authority, or any 
other document may be incorporated by reference 
in answer or partial an s wer to any item of Form 
HC provided such document or paper i s filed as an 
exhibit to the statement. — Excerpts of documents 
may be filed as exhibits if the documents are 
extensive. — Documents already on file with the 
Commissioner need not be attached a s exhibit s . 
References to information contained in exhibits or 
in documents already on file shall clearly identify 
the material and shall specifically indicate that 
s uch material is to be incorporated by reference in 
answer to the item. — Matter s hall not be incorpo 
rated by reference in any case where such incorpo 
ration — would — render the — s tatement — incomplete, 
unclear or confu s ing. 



Wht 



outline of 



icie an item requires a summary or outline 
the provisions of any document, only a brief 
s tatement shall be made as to the most important 
provisions of the document. — In addition to s uch 
s tatement, the s ummary or outline may incorporate 
by reference particular parts of any exhibit or 
document on file with the Commissioner and may 
be qualified in it s entirety by s uch reference. — Vb 
any case where two or more documents required to 
be filed as exhibits are substantially identical in all 
material re s pect s except a s to the parties thereto, 
the dates of execution, or other details, a copy of 
only one of s uch document s need to be filed with 
a s chedule identifying the omitted documents and 
setting forth the material details in which such 



documents differ from the documents a copy of 
which is filed. 

fd-) — Forms: — Information Unknown or Unavail 
able and Extension of Time to Furnish. — Informa 



tion required need be given only insofar as it is 
known or reasonably available to the person filing 

the statement. If any required information is 

unknown — and — not — reasonably — available — te — the 
p e r s on filing, cither becau s e the obtaining thereof 
would involve unreasonable effort or expense, or 
because it rests peculiarly within the knowledg e of 
another per s on filing, the — information may — be 
omitted, s ubject to the following conditions: 

fH The person filing shall give such infor - 
mation on the subject as he has knowl 
edge of or can acquire with reasonable 
effort or expense, together with the 
sources thereof; and 

{2-j The per s on filing shall include a state 

ment cither s howing that unrea s onable 
effort or expense would be involved or 
indicating the absence of any affiliation 
with the person having information. 
If it is impractical to furni s h any r e quired informa 
tion, document or report at the time it is required 
to be filed, there may be filed with the Commi s 
s ioncr a s a s eparate — document an — application: 
identifying the information, document or report in 
que s tion; s tating why the filing thereof at the time 
required is impractical; and requesting an e xt e n 
s ion of time for filing the information, document 
or report to a s pecified date. — The application shall 
be deemed granted unless the commi ss ioner within 



m 



thereof, shall enter an order 



day s after receipt 
denying the application. 

(e) Forms; Additional Information and Exhibits. 
In addition to the information expressly required to 
be included in Form HC. there shall be added s uch 
further material information, if any. as may be 
necessary — te — make — the — information — contained 
therein clear and complete. The per s on filing may 
al s o file s uch exhibits as he may desire in addition 
to those expressly required by the statement. Such 
exhibit s s hall be so marked as to indicate clearly 
the s ubject matters to which they refer. 

Statutory Authority G.S. 58-124.6. 

.0207 AMENDMENTS TO FORM HC 

Any amendment to Form HC s hall inc l ude on the 
top of the cover page the phra s e: — "Amendment 



NOT 



to" and shall indicate the date of the 



-m 



amendment and not the date of the original Tiling 

An amendment to Form HC s hall be filed within 

15 days after the end of any month in which the 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2262 



PROPOSED RULES 



following occurs: 



m- 



Thcre is a change in the control of the 
registrant, in which case the entire Form 
HC shall be made current; or 



There is a material change in the 



tfef 



mation given in Item (5) or Item (6) of 

Form HC. 
An amendment to Form HC shall be filed within 
1 20 davs after the end of each fiscal year of the 
altimute controlling per s on of the in s urance hold 
ing company system. Such amendment shall make 
current all information in Form HC. 

Statutory Authority G.S. 58-124.6. 

.0208 EXEMPTIONS FROM FILING FORM 
HC 



A foreign or alien insurer otherwi s e s ubject to 
the act shall not be required to register if it is 
admitted in the domiciliary s tate of the principal 
insurer und in said state is subject to disclosure 
requirements and standard s adopted by statute or 
regulation which are s ubstantially similar to those 

1-2 



contained in Article liA. provided tne lommi s 
sioner may require such insurer to furnish a copy 



»#-&e 



i s tration statement or other information 



filed in s aid state. For the purpo s e s of this Section 



i\* 



-stefe 



)f entry of an alien — insurer shall be 



deemed to be its domiciliary state. 

Statutory Authority- G.S. 58-124.6. 

.0209 ALTERNATIVE AND 

CONSOLIDATED REGISTRATIONS: 
FORM HC 

Anv authorized insurer may file a registration 
statement on behalf of any affiliated in s urer or 



insurers — w 



hteb- 



rcqi 



jd to 



register 



undc 



Article 12A. — A regi s tration s tatement may include 
information regarding any in s urer in the insurance 
holding company system even if such insurer is not 



authorized to do bu s in c 



this state. — In lieu of 



filing a regi s tration statement on Form HC. the 
authorized in s urer may file a copy of the rcgistra 
tion s tatement or similar report which it is required 
to file in its state of domicile, provided: 



<-H- 



f2-H 



The s tatement or report contain s sub s tan 
tinlly s imilar information required to be 
furnished on Form HC; and 
The filing in s urer i s the principal insur 



anee company in the insurance holding 

company s y s tem. 
The question of whether the filing insurer i s the 
principal — in s urance — company — m — tire — insurance 
holding company system is a que s tion of fact, and 



an in s urer filing a registration statement or report 
in lieu of Form HC on behalf of an affiliated 
insurer shall set forth a simple statement of facts 
which will substantiate the filing insurer's claim 
that it. — in fact. — is the principal insurer in the 
insurance holding company system. 

With the prior approval of the Commissioner, an 
unauthorized insurer may follow any of the proce 
dures which — could be done by an authorized 
insurer a s hereinabove s et forth. 

Any in s urer may take advantage of the provisions 
of G.S. 58 12 4 .2(f) or (g) of Article 12A without 
obtaining the prior approval of the Commi ss ioner. 
The Commissioner, however, reserves the right to 
require individual filing if he deems such filings 
necessary in the interest of clarity, ease of admin 
istration or the public good. 



Statutory Authority G.S. 58-124.6. 

.0210 DISCLAIMERS AND TERMINATION 
OF REGISTRATION UNDER FORM 
HC 



A di s ek 



h s elaimor of affiliation or a reque s t for tcrmi 
nation of regi s tration claiming that a person does 
not. or will not upon the talcing of some propo s ed 
action, control another person (hereinafter referred 
to a s the " s ubject") s hall contain the following 
information: 



H- 



&A- 



-the — number of authorized. — issued and 
out s tanding voting s ecurities of the sub 
jeett 

with re s pect to the per s on whose control 
i s di s claimed all s hares of the subject's 
voting securities which arc held of record 
or known to be beneficially owned, and 



?h shares concerning 



<e — number or sueu — snaics — conccr 
which th e re i s a right to acquire, directly 
or indirectly: 

£¥) all material relationship s and bases for 

affiliation between the s ubject and the 
person who s e control is disclaimed and 



all affiliates of such person: 



*4*- 



a s tatement explaining why such person 
should not be con s idered to control the 
subject. 
A request for termination of registration shall be 
deemed to have been granted unle s s the Commi s 
sioner. within 10 days after he receive s the re 
quest, notified th e regi s trant otherwise. 



Statutory Authority G.S. 58-124.2. 

.0211 WHO MUST FILE THE LNITIAL 
STATEMENT FORM HC 



2263 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



{a} — Every North Carolina domestic insurance 
company in a holding company orbit must file a 
Form HC in the manner and form a s de s cribed in 
11 NCAC 11A .0 44 8. 

(b) Every foreign in s urance company licensed in 
North Carolina in a holding company orbit whose 
state of domicile — dees — net — have an — insurance 
holding Registration and Disclosure Act s imilar to 
the North Carolina act must file a Form HC with 
the North Carolina Department of Insurance and 
such filing must be made on the form and manner 
as described in 11 NCAC .0 4 18. 



Statutory Authority G.S. 58-124. 1 to 58-124. 11. 



.0212 FOREIGN COMPANIES EXEMPT IF 
APPLICABLE 

Foreign companies licensed in North Carolina 
and desiring exemption from the filing require 
ments of North Carolina mu s t notify this depart 
ment of such exemption in writing. — Such notifica 
tion must state the statute of their state of domicile 
and c e rtify that their state of domicile has a hold 
ing company s tatute which is substantially similar 
to the North Carolina statute. — The Department 
reserves the right to require copies of all regi s tra 
tion and disclosure filings and all amendments if 
the Commissioner deems it necessary. 

Statutory Authority G.S. 58-124.1 to 58-124.11. 



.0213 WHEN TO FILE THE HC 
STATEMENT rNITIAL 

Every insurer must file a registration and disclo 
sure statement in the manner and form a s de 
scribed in 1 1 NCAC 1 1 A .0 44 8 60 days after July 
1. 1971 or 15 days after it become s s ubject to 
r e gi s tration, whichever is later. 



Statutory Authority G.S. 58-124.1 to 58-124.11. 

.0214 WHEN TO FILE AMENDMENTS TO 
THE INITIAL STATEMENT FORM 
HC 



-f* 



;nd the 



^vcry insurer tiling a Form HC must amer 
initial Form HC when one or more of the follow 
ing action s occur: 



m- 



When th 



ere is a change in the u l timate 
controlling per s on. Item 1 a s reported in 
the initial s tatement Form HC (see form 
referred to in Form 1 1 NCAC 1 1 A .0 44 8 
for content of Item 1); Such change must 
be reported to — commissioner not — l ater 
than 15 days after the month in which the 
change took place; 



f3j When there is a material change in Item s 

5 and 6 as reported in the initial s tate 
ment Form HC ( s ee form referred to in 
1 1 NCAC 1 1 A .0 44 8 for contents of Item 



5 and 6): 



also Rule 11 NCAC 11B 



<?&- 



.020 4 — fef — meaning — of material. — sttek 
change must be reported to commis s ioner 
not later than 15 days after the month in 
which the change took place; 
When there is a change in any item as 
reported in Form HC. such change shall 
be reported within 120 days after end of 
fiscal year, in as much a s the fiscal year 
is a calendar year for annual statement 
purposes; 

{4} Every insurer subject to the act must 

refile its HC filing by May — 1 of each 
year and prior to renewal of licen s e or 
provide a letter signed by an officer of 
the company to the effect that there ha s 
been no change in the filing as previously 
submitted. 



Statutory Authority G.S. 58-124.1 to 58-124.11. 

.0215 DEFINITIONS 

(a) Unless the context otherwise clearly re- 
quires, the definitions in G.S. 58-19-5 are incorpo- 
rated into this Section by reference. Other nomen- 
clature or terminology \s according to industry 
usage if not defined in this Section or jn G.S. 58. 

(b) As used in this Section: 

(1) "Act" means the Insurance Holding 
Company System Regulatory Act. 
Article 19 of G.S. 58. 
"Executive officer" means chief execu- 



ill 



£3} 



(4) 



tive officer, chief operating officer, 
chief financial officer, treasurer, secre- 
tary, controller, or any other individual 
performing functions corresponding to 
those performed by these officers under 
whatever title. 

"Foreign insurer" includes an alien 
insurer except where clearly noted 
otherwise. 

"Ultimate controlling person" means a 
person that js not controlled by any 
other person. 



Statutory Authority G.S. 58-2-40. 

.0216 FORMS - GENERAL REQUIREMENTS 

(a) Forms A^ B^ C^ and D are guides m the 
preparation of the statements required by G.S. 
58-19-15. 58-19-25. and 58-19-30. They are not 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2264 



PROPOSED RULES 



blank forms that are to be filled in. The state- 
ments filed shall contain the numbers and captions 
of aH items, but the text of the items may be 
omitted if the answers to the items are prepared in 
such a manner as to indicate clearly the scope and 
coverage of the items. All instructions, whether 
appearing under the items of the form or elsewhere 
m the form, are to be omitted. Unless expressly 
provided otherwise, if any item is inapplicable or 
the answer to the item is in the negative, a state- 
ment to that effect shall be made, 
(b) At least one complete copy of each state- 



within the preceding three years need not be 
attached as exhibits. References to information 
contained in exhibits or in documents already on 



ment. including exhibits and all other papers and 
documents filed as a part of the statement, shall be 
filed with the Commissioner by mail addressed to: 
Insurance Commissioner. State of North Carolina. 
Financial Compliance Section. P.O. Box 26387. 
Raleigh. North Carolina. 2761 1 . The copy or 
copies shall be manually signed in the manner 
prescribed on the form . If the signature of any 
person js affixed under a power of attorney or 
other similar authority, a copy of the power of 
attorney or other authority shall also be filed with 
the statement. 

(c) Statements shall be prepared on paper 8 1/2" 
x 1 1 " in size and bound at the tog or the top 
left-hand corner. Exhibits and financial state- 
ments, unless specifically prepared for the filing- 
may be submitted in their original sizes. All 
copies of any statement, financial statements, or 
exhibits shall be clear, easily readable, and suitable 
for photocopying. Debits in credit categories and 
credits in debit categories shall be designated so as 
to be clearly distinguishable as such. Statements 
shall be in the English language and monetary 
values shall be stated fn United States currency. if 
any exhibit or other paper or document filed with 
the statement is in a foreign language, it shall be 
accompanied by a translation into the English 
language and any monetary value shown in a 
foreign currency normally shall be converted into 
United States currency. 

(d) Information required by an item of Form A. 
Form B. or Form D may be incorporated by 
reference in answer or partial answer to any other 
item. Information contained in any financial 
statement, annual report, proxy statement, state- 
ment filed with a governmental authority, or any 
other document may be incorporated by reference 
[n answer or partial answer to any item of Form 
A. Form B. or Form D. provided the document or 
paper is filed as an exhibit to the statement. 
Excerpts of documents may be filed as exhibits if 
the documents are extensive. Documents currently 
on file with the Commissioner that had been filed 



file shall clearly identify the material and shall 
specifically indicate that the material is to be 
incorporated by reference in answer to the item. 
Matter shall not be incorporated by reference if 
incorporation would render the statement incom- 
plete, unclear, or confusing. 

(e) If an item requires a summary or outline of 
the provisions of any document, only a brief 
statement shall be made as to the pertinent provi- 
sions of the document. In addition to this state- 
ment, the summary or outline may incorporate by 
reference particular parts of any exhibit or docu- 
ment currently on file with the Commissioner that 
had been filed within the preceding three years and 
may be qualified in its entirety by the reference. 
If two or more documents required to be filed as 
exhibits are substantially identical fn all material 
respects except as to the parties thereto, the dates 
of execution, or other details, a copy of only one 
of the documents may be filed, along with a 
schedule identifying the omitted documents and 
setting forth the material details fn which those 
documents differ from the documents filed. 

(f) Information required shall be given only 
insofar as h is known or reasonably available to 
the person filing the statement. If any required 
information is unknown and not reasonably avail- 
able to the person filing, either because the obtain- 
ing thereof would involve unreasonable effort or 
expense, or because ft rests peculiarly within the 
knowledge of another person not affiliated with the 
person filing, the information may be omitted. 
subject to the following conditions: 

( 1 ) The person filing shall give such infor- 
mation on the subject as it possesses or 
can acquire without unreasonable effort 
or expense, together with the sources 
thereof: and 

(2) The person filing shall include a state- 
ment either showing that unreasonable 
effort or expense would be involved or 
indicating the absence of any affiliation 
with the person within whose knowl- 
edge the information rests and stating 
the result of a request made to the 
person for the information. 

(g) If it is impractical to furnish any required 
information, document or report at ffie time h is 
required to be filed, there may be filed with the 
Commissioner as a separate document: 

( 1 1 identifv'ing the information, document 
or report in question; 



2265 



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XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



(2) stating why the filing thereof at the 
time required is impractical; and 

(3) requesting an extension of time for 
filing the information, document or 
report to a specified date. The request 
for extension shall be deemed granted 
unless the Commissioner within 30 days 
after receipt thereof enters an order 
denying the request. 

(h) In addition to the information expressly 
required to be included in Form A, Form B, Form 
C, and Form D, there shall be added such further 
material information, if any, as may be necessary 
to make the information contained therein not 
misleading. The person filing may also file such 
exhibits as it may desire in addition to those 
expressly required by the statement. These exhib- 
its shall be so marked as to indicate clearly the 
subject matters to which they refer. Amendments 
to Forms AjBjCorD shall include on the top of 
the cover page the phrase "Amendment No. 
^ === ^^ = tcT and shall indicate the date of the 
amendment and not the date of the original filing. 

Statutory Authority G.S. 58-2-40; 58-19-15; 
58-19-25; 58-19-30. 

.0217 ACQUISITION OF CONTROL - 
STATEMENT FILING 

A person required to file a statement under G.S. 
58-19-15 shall furnish the required information on 
Form A. 

Statutory Authority G.S. 58-2-40; 58-19-15. 

.0218 ACQUISITION OF CONTROL - 
SOURCE OF CONSIDERATION 

In providing the information required by G.S. 
58-19-l5(b)(2), where the source of the consider- 
ation used or to be used jn effecting the merger or 
other acquisition of control is a loan made in the 
lender's ordinary course of business, the identity 
of the lender shall be revealed to the Commission- 
er, but shall be kept confidential by the Commis- 
sioner, if the person filing the statements so re- 
quests. 

Statutory Authority G.S. 58-2-40; 58-19-15. 

.0219 ANNUAL REGISTRATION OF 

INSURERS - STATEMENT FILING 

(a) An insurer required to file an annual regis- 
tration statement under G.S. 58-19-25 shall furnish 
the required information on Form B. 

(b) An insurer required to file an annual regis- 



tration statement under G.S. 58-19-25 shall also 
furnish the information required on Form C. An 
insurer shall file a copy of Form C in each state ]n 
which the insurer is authorized to do business, if 
requested by the insurance regulator of that state. 
The insurer has J_5 days after receipt of that 
regulator's notice to file the Form C. 

Statutory Authority G.S. 58-2-40; 58-19-25. 

.0220 ALTERNATIVE AND 

CONSOLIDATED REGISTRATIONS 

(a) Any authorized insurer may file a registra- 
tion statement on behalf of any affiliated insurer or 
insurers that are required to register under G.S. 
58-19-25. A registration statement may include 
information not required by the Act regarding any 
insurer in the insurance holding company system 
even if the insurer js not authorized to do business 
in this State. In lieu of filing a registration state- 
ment on Form B, the authorized insurer may file 
a copy of the registration statement or similar 
report that it is required to file in its state of 
domicile, provided: 

(1) the statement or report contains sub- 
stantially similar information required 
to be furnished on Form B; and 

(2) the filing insurer is the principal insur- 
ance company jn the insurance holding 
company system. 

(b) The question of whether the filing insurer fs 
the principal insurance company in the insurance 
holding company system is a question of fact; and 
an insurer filing a registration statement or report 
in lieu of Form B on behalf of an affiliated insurer 
shall set forth a brief statement of facts that will 
substantiate the filing insurer's claim that it^ in 
fact, is the principal insurance company in the 
insurance holding company system. 

(c) With the prior approval of the Commission- 
er, an unauthorized insurer may follow any of the 
procedures available to an authorized insurer under 
Paragraph (a) of this Rule. 

(d) Any insurer may follow G.S. 58-19-25(g) or 
(h) without obtaining the prior approval of the 
Commissioner. The Commissioner may require 
individual filings if he deems the filings necessary 
in the interest of clarity, ease of administration, or 
the public good. 

Statutory Authority G.S. 58-2-40; 58-19-25. 

.0221 DISCLAIMERS AND TERMINATION 
OF REGISTRATION 

(a) A disclaimer of affiliation or a request for 



7:20 



NORTH CAROLINA REGISTER 



January IS, 1993 



2266 



PROPOSED RULES 



termination of registration claiming that a person 
does not, or will not upon the taking of some 
proposed action, control another person (hereinaf- 
ter the "subject" ) shall contain the following 
information: 

( 1 ) the number of authorized, issued and 
outstanding voting securities of the 
subject; 

(2) with respect to the person whose con- 
trol is denied and all affiliates of the 
person, the number and percentage of 
shares of the subject's voting securities 
that are held of record or known to be 
beneficially owned, and the number of 
such shares concerning which there is a 
right to acquire, directly or indirectly; 

(3) all material relationships and bases for 
affiliation between the subject and the 
person whose control is denied and all 
affiliates of the person; 

(4) a statement explaining why the person 
should not be considered to control the 
subject. 

(b) A request for termination of registration 
shall be deemed to have been granted unless the 
Commissioner, within 30 days after he receives the 
request, notifies the registrant otherwise. 

Statutory Authority G.S. 58-2-40; 58-19-25. 

.0222 TRANSACTIONS SUBJECT TO 

PRIOR NOTICE - NOTICE FILE\G 

(a) An insurer required to give prior notice of a 
proposed transaction under G.S. 58-19-30(b) shall 
furnish the required information on Form D. 

(b) Requests under G.S. 58-19-30(c) for approv- 
aJ of extraordinary dividends or any other extraor- 
dinary distribution to shareholders shall include the 
following: 

The amount of the proposed dividend; 
The date established for payment of the 
dividend; 

A statement as to whether the dividend 
is to be in cash or other property and. 
if in property, a description thereof, its 
cost, and its fair market value together 
with an explanation of the basis for 
valuation; 

A copy of the calculations determining 
that the proposed dividend [s extraordi- 
nary. The work paper shall include the 
following information: 
(A) The amounts, dates and form of pay- 
ment of aU dividends or distributions 
(including regular dividends but ex- 



Oj 
ill 

ill 



141 



eluding distributions of the insurers 
own securities) paid within the period 
of j_2 consecutive months ending on 
the date fixed for payment of the 
proposed dividend for which approval 
is sought and commencing on the day 
after the same day of the same month 
in the last preceding year; 

(B) Surplus as regards policyholders (total 
capital and surplus) as of the preced- 
ing December 31 ; 

(C) If the insurer is a life insurer, the net 
gain from operations for the 12-month 
period ending the preceding Decem- 
ber 31; 

(D) If the insurer is not a life insurer, the 
net income less realized capital gains 
for the 12-month period ending the 
preceding December 31 and the two 
preceding 12-months periods; and 

(E) If the insurer is not a life insurer, the 
dividends paid to stockholders exclud- 
ing distributions of the insurer's own 
securities in the preceding two calen- 
dar years; 

(5) A balance sheet and statement of in- 
come for the period intervening from 
the last annual statement filed with the 
Commissioner and the end of the month 
preceding the month in which the re- 
quest for dividend approval is submit- 
ted; 

(6) A brief statement as to the effect of the 
proposed dividend upon the insurer's 
surplus and the reasonableness of sur- 
plus in relation to the insurer's out- 
standing liabilities and the adequacy of 
surplus relative to the insurer's finan- 
cial needs; and 

(7) A brief statement as to the intended 
use(s) of the proposed dividend or 
distribution by the parent, and, if appli- 
cable, any upstream parent, of the 
insurer. 

Statutory Authority G.S. 58-2-40; 58-19-30. 

.0223 ADEQUACY OF SURPLUS 

The factors set forth in G.S. 58-19-30(d) are not 
an exhaustive list. In determining the adequacy 
and reasonableness of an insurer's surplus no 
single factor is controlling. The Commissioner 
will consider the net effect of a]] of those factors 
plus other factors bearing on the financial condi- 



tion of the insurer. In comparing the surplus 



2267 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



maintained by other insurers, the Commissioner 
will consider the extent to which each of these 
factors varies from company to company; and in 
determining the quality and liquidity of invest- 
ments in subsidiaries, the Commissioner will 
consider the individual subsidiary and may dis- 
count or disallow its valuation to the extent that 
the individual investments so warrant. 

Statutory Authority- G.S. 58-2-40; 58-19-30. 

SECTION .0400 - WORKMEN'S COMPEN- 
SATION FUND 

.0402 STOCK WORKMEN'S 

COMPENSATION SECURITY FUND 
CREATED 

In order to administer this law an account has 



^T-he 



inder 



been established with the State Treasurer, 
purpose of this account i s to: 

f4-) receive — assessments — as — required 

North Carolina General Statute 97 109, 

{3} receive — interest — from — the — inve s tment 

account, and 

{£) to pay claims of insolvent stock carriers. 

At least, but not re s tricted to, twice annually this 
account is reviewed and accumulated funds are 
invested. — The amount of the inve s tment is con 



-e# 



trolled — by — anticipated — expense — of — payment 
claims. — The types of investments made by thi s 
fund are controlled by the Commissioner of Insur 
ance. — The State Trea s urer is charged with the 
responsibility of safekeeping these inve s ted fund s . 

Statutory Authority G.S. 97-107; 97-111. 

.0403 MUTUAL WORKMENS' 

COMPENSATION SECURITY FUND 
CREATED 

In ord e r to admini s ter thi s law an account has 
been establi s h e d with the State Treasurer. — T-he 
purpo s e of thi s account is to: 

<+) receive as s essments as required — under 

North Carolina General Statute 97 116, 
rec e ive — interest — from — the — investment 



m- 



&- 



account, and 



-te- 



-pay- 

efSr 

-btrt- 



laims of insolvent mutual earri 



-this 



At lea s t, but not re s tricted to, twice annually 
account is reviewed and accumulated funds are 
inve s ted. — The amount of the investment i s con 
trolled — by — anticipated expen s e of payment s — &f 
claim s . — The type s of investments made to thi s 
fund are controlled by the Commi ss ioner of In s ur 
anc e . — The State Treasurer is charged with the 



re s pon s ibility of s afekeeping these invested fund s . 

Statutory Authority G.S. 97-111; 97-114. 

.0404 INVESTMENTS OF FUNDS TO BE IN 
COUPON FORM 

All inve s tment s made by the "stock" and "mutu 
al" Workmen's Compensation Security Funds shall 
be in coupon form only. 

Statutory Authority G.S. 97-111; 97-112; 97-114. 



.0405 



VERIFIED REPORTS OF PREMTUMS 
TO BE FILED 



Annually a form is prepared for distribution to 
all stock and mutual companies having authority to 
write — workmen' s — compen s ation — insurance — at*} 



which form i s described in 



NCAC 1 1 A .0 44 6. 



The for 



-k 



rf-i 



and 



)im i s mailed in January ot each year and is 
due on or before March 1st of the same year. The 
form requires, but i s not limited to. the following 
information: 

fB name of company; 

f3) aggregate — of workmen' s compensation 

loss reserves applicable to North Carolina 
bu s ine ss (without credit being taken for 
reinsurance ceded); 
0) type of 



stock 



mutual s 



type ot organization: 

reciprocal; 

(4) signature of officer; 

(§} replie s must be made under oath; 

(6) verification under oath. 



Statutory Authority G.S. 97-108; 97-111; 97-115. 



.0406 



CONTRIBUTIONS: STOCK AND 
MUTUAL CARRIERS 



of the 



Wh e n applying the formula of five percent 
los s reserves, the result must equal the value of th e 
cash and investment fund. — The Commi ss ioner of 
In s urance may determin e that an a ss essment is 
needed to bring the fund s into compliance with the 



s tatute. 



tg me 
(The Commissioner of In s urance can 
assess the companies at the rate of one percent of 
net premium written for a s ix month period.) — If 



after this asses 



;nt has been received, the cash 



and investment accounts remain short of eompli 



ance with s tatute, the C 



ommi ss ioncr or in s urance 



may make an additional assessment of one percent 

of the remaining — s ix months, — premiums. T-he 

s chedule for such assessments is a s follow s : 



m- 



March of each year 



rece i ve lo s s re 



(3)- 



s erve s ; 

April of each year determine if a ss e ss 

ment i s needed; 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2268 



PROPOSED RULES 



(3) May of each year — make assessment one 

percent of net written premiums from 
January 1st through June 30th of previou s 
year; 

f+) June of each year determine if addi 

tional assessment is needed, and if need 

fS-) Mak e — a ss e ss ment — ene — pereent — of net 

premiums from July 1st through D e eem 
ber 31 s t of previous year. 



Statutory Authority G.S. 97-109; 97-111; 96-116. 

.0407 CALL FOR ONE PERCENT 

ASSESSMENT STOCK AND MUTUAL 



Wht 



ion determined by statute to be needed the eall 
for the one pereent a ss essment shall be on the 



■r-m- 



4^M- 



inated 



*- 



NCAC 1 1 A .0 44 7. Th 



iS 



form must contain, but is not limited to, the 
following items: 
f-h name of company. 



f3-) address of company. 

0) amount — e# — workm 



+^ 



&h 



<€}- 



efi-s — compensation 
insurance — premiums — written — m — North 
Carolina for the time period involved. 
-a — calculation — »f- — efte — pereent — »f- — the 
amount — e4 — workmen's — compensation 
premiums written in North Carolina for 
the time period involved, 
signature and title of officer of company. 

rtfHi 

verification under oath. 



Statutory Authority G.S. 97-111; 97-109; 97-116. 

SECTION .0500 - PROMOTING AND 
HOLDLNG CONDP ANTES 



.0501 PROMOTLNG AND HOLDLNG 

COMPANIES: GENERAL NATURE 

The promoting and ho l di 



f 



:e promoting and ho l ding companies section o 
the securities operational unit is responsible for the 
administration of Article 12 of the in s urance laws 
of North Carolina. 

Statutory Authority G.S. 58-120 to 58-124. 

.0503 FOREIGN AND HOLDING 

COMPANIES: UNLICENSED 
SUBSIDIARIES 

In the event an insurance or promoting or 
holding corporation is desirous of selling its 
securities in this state and such insurance or 
promoting or holding company does not have any 
of its subsidiaries licensed in this state, such 



subsidiaries must meet the same minimum capi- 
tal/surplus requirements for admission as indicated 
in 11 NCAC 1 4 .0201, et scq., even if the subsid- 
iaries have no intention of obtaining license in this 
state. 



Statutory Authority 
58-18-25. 



G.S. 58-2-40; 58-18-1 to 



.0506 FOREIGN COMPANY SECURITIES 
SALE: "POSITION LETTER" 

As used in this Section, "position letter" means 
a letter from the Department that states the posi- 
tion of the Department relative to the sale of 
certain securities as offered. The letter shall state 
the predications upon which the "position letter" is 
written. Offering companies or their counsel not 
adhering to the terms and conditions of the letter 
may be refused further service by the Department. 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0507 FOREIGN COMPANY SECURITIES: 
PRIVATE PLACEMENT 

If an insurance or promoting or holding corpora- 
tion wants to selj its securities in this State, a 
position letter may be issued by the Department. 
Private placement shall be presumed to mean an 
offering made to fewer than 25 private citizens or 
corporate citizens of this State within a 12-month 
period. The offering company must comply with 
or be exempt from all other statutes and rules that 
pertain to the sale of securities and registration of 
broker/dealers. 



Statutory Authority G.S. 
58-18-25. 



58-2-40; 58-18-1 to 



.0508 FOREIGN COMPANY SECURITIES: 
VERIFIABLE CAPITAL/SURPLUS 

When determining if an offering company has 
capital and surplus that would qualify' the company 
or its subsidiary to meet the Department's mini- 
mum capital and surplus requirements for licens- 
ing, the capital and surplus must be verified m the 
appropriate NAIC Annual Statement as filed with 
the appropriate state of domicile. Capital and 
surplus figures from other sources may be accept- 
ed by the Commissioner. 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0509 FOREIGN COMPANY SECURITIES: 



2269 



7:20 



XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



INCONSEQUENTIAL INSURANCE 
RATIOS 

When determining if an offering company can 
obtain a position letter from the Department to sell 
its securities in North Carolina, the following 
applies: If the assets of the offering company are 
less than three percent derived from the operations 
of an insurance subsidiary, then the offering 
company may request exemption from the Depart- 
ment based on the de minimus amount resulting 
from its insurance operations; however, it is 
required to comply with or be exempt from all 
other statutes and rules administered by the office 
of the Secretary of State or any other regulatory 
agency in North Carolina. 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0510 FOREIGN COMPANY SECURITIES: 
CONFIDENTIALITY OF MATERIAL 

All filings, whether preliminary or final, made 
under Article 18 of G.S. 58 are public documents. 
Material or folders marked "Confidential" or 
"Closed to General Public" by the filer are public 
records once filed with the Department. 

Statutory Authority G.S. 58-2-40; 58-2-100; 
58-18-1 to 58-18-25. 

.0511 FOREIGN COMPANY SECURITIES: 
SHELF REGISTRATION 

Offering companies or counsel for offering 
companies shall obtain a position letter each time 
an additional block of the initial issue is made 
available for sale to prospective buyers located in 
North Carolina. 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0512 FOREIGN COMPANY SECURITIES: 
DISCLAIMER OFFSHORE 

If an offshore insurance or promoting or holding 
corpo ration wants to sell its securities in this State 
and meets the appropriate terms for issuance of a 
position letter, the prospectus or offering memo- 
randum must contain, by sticker or otherwise, the 
following language in at least 10-point upper case 
type: "These securities have not been approved or 
disapproved by the Commissioner of Insurance of 
the State of North Carolina nor has the Commis- 
sioner ruled upon the accuracy or adequacy of this 
document. The buyer in North Carolina under- 
stands that neither the offerer nor its subsidiary are 



licensed as insurance companies in North Carolina, 
nor do they meet the basic admissions require- 
ments for licensing as insurance companies in 
North Carolina." 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0513 FOREIGN COMPANY SECURITIES: 
DISCLAIMER GENERAL 

If a foreign insurance or promoting or holding 
corporation wants to sell its securities in this State 
and meets the appropriate terms for issuance of a 
position letter, the prospectus or offering memo- 
randum contain, by sticker or otherwise, the 
following language in at least 10-point upper case 
type: "These securities have not been approved or 
disapproved by the Commissioner of Insurance of 
the State of North Carolina nor has the Commis- 
sioner ruled upon the accuracy or adequacy of this 
document." 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0514 FORMATION OF DOMESTIC 
COMPANIES: PROCEDURAL 
HANDLING STEP 1 

Incorporators and or promoters that want to sell 
securities to raise capital for the formation of a 
domestic insurance company or to fund feasibility 
studies to determine if a domestic company should 
be formed must first write the Department and 
request the following: 

an informal conference with members of 



ill 

Ql 

14] 



the Department to discuss the proposal; 

information on a timetable to implement 

the proposal; 

information on obtaining a certificate of 

authority to sell securities to the public; 

and 

information on obtaining a certificate of 



authority for agents to make an offering 
to the public. 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 

.0515 FOREIGN COMPANY SECURITIES: 
INSTITUTIONAL INVESTORS 

If a foreign insurance or promoting or holding 
corporation wants to sell its securities in this State 
and its sales presentation and market approach will 
be restricted to accredited investors only, the 
corporation does not have to obtain a position 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2270 



PROPOSED RULES 



letter from the Department before the solicitation. 
The corporation must comply with or be exempt 
from all other statutes and rules governing the sale 
that are administered by the Office of Secretary of 
State or any other regulatory' agency. 

Statutory Authority G.S. 58-2-40; 58-18-] to 
58-18-25; 78A-17-(8). 

.0516 DOMESTIC COMPANY: 
PROJECTION 

Incorporators and or promoters must submit for 
review by the Department their projections for 
capitalization and operation of the proposed do- 
mestic insurance company. The projections must 
be written in a manner that allow the projected 
figures to be traceable to future NAIC annual 
financial statements. The projections shall be 
reviewed by the Department for adequacy and 
accuracy. 

Statutory Authority G.S. 58-2-40; 58-18-1 to 
5 S- 18-25. 

.0517 DOMESTIC COMPANY: 

BACKGROUND EWESTIGATION 
REPORT 

Incorporators and promoters and agents for the 
incorporators and promoters are subject to back- 
ground investigations conducted by the Depart- 
ment. Investigations will be completed before any 
sale or offer to sell securities. The costs of inves- 
tigations shall be borne by the incorporators and 
promoters. 

Statutory Authority G.S. 58-2-40; 58-2-133; 
58-18-1 to 58-18-25. 

.0518 DOMESTIC COMPANY: ESCROW 
AGREEMENT 

An escrow agreement must be arranged by the 
persons listed in 1 1 XCAC 1 IB .0517 with a bank 
situated jn North Carolina. If all other require- 
ments are met, the Department will issue a certifi- 
cate of authority to sell Class B common stock on 
a subscription basis. The subscription must be 
collected and placed in the escrow account. After 
the required amount of capital and surplus is in 
escrow and verified by the escrow agent, the 
Articles of Incorporation will be certified to the 
Secretary of State. 



Statutory Authority G.S. 58-2-40; 58-18-1 to 
58-18-25. 



SECTION .0600 - WORKERS' 
COMPENSATION SELF-ENSURANCE 

.0601 DEFINITIONS 

As used in this Section: 

(1) "Act" means Chapter 97 of the North 
Carolina General Statutes, as amended. 

(2) "Certified audit" means an adult audit 
upon which an auditor duly qualified to 
practice as a public accountant or certi- 
fied public accountant expresses his 
professional opinion that the accompany- 
ing statements fairly present the financial 
position of the employer or of the group, 
in conformity with generally accepted 
accounting principles as considered nec- 
essary by the auditor under the circum- 
stances. 

(3) "Commissioner" means the Commission- 
er of Insurance or his authorized repre- 
sentative. 

(4) "Corporate surety" means an insurer 
authorized by the Commissioner to write 
surety business in North Carolina. 

(5) "Employer" means a self-insured individ- 
ual employer. 

(6) "Fund year" means that elected period of 
coverage, up to 12 month in duration, 
pursuant to which a group self-insurer 
extends coverage to its members. 

(7) "Group" means a self-insured group of 
employers. 

(8) "Loss fund" means that portion of net or 
standard premium, exclusive of past due 
balances deemed to be delinquent, that 
covers the retention of liability for a 
self-insurer under the terms of an aggre- 
gate excess insurance contract; and 
means, in the absence of an aggregate 
excess policy, that portion of net or 
standard premium, exclusive of past due 
balances deemed to be delinquent, that is 
allocated to pay claims. 

(9) "Manual premium" means premium 
determined by multiplying the annualized 
payroll amount, segregated into the prop- 
er workers" compensation job classifica- 
tions, by the applicable manual premium 
rates approved for use in North Carolina. 

(10) "Qualified actuary" means a member m 
good standing of the Casualty Actuarial 
Society or a member in good standing of 
the American Academy of Actuaries who 
has been approved as qualified for sign- 
ing casualty loss reserve opinions by the 



2271 



7:20 



XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Casualty Practice Council of the Ameri- 
can Academy of Actuaries. 

(11) {+©) "Self-insurer" means either a 
self-insured individual employer or 
self-insured group of employers. 

(12) {44) "Service company" means a busi- 
ness that has contracted with an employer 
or group for the purpose of providing 
any or all services necessary to a 
self-insured program. 

(13) {43) "Surplus" means all other assets a 
loss fund has on hand that are in excess 
of all loss reserves and actual and contin 
gent liabilities , including general business 
expen s es . 

(14) {+3) "Trustees" means the governing 
body of a group that is elected by its 
members for stated terms of office to 
direct the administration of a group; and 
whose duties include responsibility for 
approving applications for new members 
of such group. 

(15) {44) "Trustees' fund" means any mone- 
tary fund under the control of the board 
of trustees of a group that is not part of 
the loss fund or that is not set aside to 
pay claims. 

Statutory Authority G.S. 97-93. 

.0602 ADMINISTRATION - ALL 
SELF-INSURERS 

(a) Each self-insurer, as a condition of the 
authority to self-insure, shall provide proof of 
compliance with the provisions of this Section 
regarding its ability to operate a program of 
self-insurance, either through in-house capabilities 
or servicing companies. 

(b) Every self-insurer shall make provision for 
competent persons to administer and adjust claims. 

(c) If a self-insurer contracts with a service 
company, the Commissioner may use the service 
company as an intermediary in his dealings with 
the self-insurer if the Commissioner determines 
that this will result in a more rapid and accurate 
flow of information from the self-insurer and will 
aid in the self-insurer's compliance with this 
Section and the act. 

(d) Each self-insurer contracting with a service 
company shall notify the Commissioner within 30 
days after the contract execution. 

(e> Each self-insurer and service company shall 
maintain its records in such manner to enable the 
Commissioner or any designated auditor to verify 
the accuracy and completeness of all reports and 



documents that are submitted to the Commissioner 
pursuant to this Section, as well as all records and 
reports necessary to evaluate the financial solvency 
of the self-insurer and its ability to meet its obliga- 
tions under the act. Such records shall be open to 
inspection by the Commissioner during regular 
business hours. Such records shall be retained for 
a period of time sufficient to ensure their availabil- 
ity for audit purposes. In the absence of other 
guidelines established by the Commissioner, all 
records shall be retained according to the schedule 
adopted by the Commissioner for insurers. The 
location of these records shall be within North 
Carolina and shall be made known to the Commis- 
sioner as necessary for audit purposes. A 
self-insurer may keep records outside of North 
Carolina; provided, that the self-insurer shall make 
such records available for inspection within North 
Carolina within ten days after any request for 
inspection by the Commissioner. If a self-insurer 
has contracted with a service company for claims 
handling processing , the self-insurer's claims files 
and related records may be located at the offices of 
the service company. 

(f) Each self-insurer's and service company's 
records may, for good cause shown, be audited. 
If ordered, such audits shall be performed by 
accountants or auditors acceptable to both the 
self in s urer and to designated by the Commission- 
er. The reasonable cost of such audits shall be 
borne by the party examined. 

(g) After each audit conducted, a written report 
shall be prepared and submitted to the Commis- 
sioner with a copy to the self-insurer or service 
company, and such report shall be a part of the 
annual review for compliance with this Section. 
Any deficiencies cited by the audit report shall be 
considered in determining whether there may be 
grounds for the suspension, revocation, or 
nonrenewal of the authority to self-insure; provid- 
ed, however, that no self-insurer shall have its 
authority to self-insure suspended, revoked or not 
renewed without a prior notice and hearing before 
the Commissioner. 

Statutory Authority G.S. 58-2-145; 97-93. 

.0604 REPORTS - ALL SELF-INSURERS 

(a) Each self-insurer shall submit to the Com- 
missioner payroll information for the purpose of 
tax assessment as required by this Section. The 
Rules, classifications, and rates as set forth in the 
most recently approved workers' compensation and 
employers' liability insurance manual governs the 
audits of payrolls and the adjustments of premi- 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2272 



PROPOSED RULES 



urns. Payroll information shall be submitted 
summarized by classification. Each self-insurer 
shall maintain true and accurate payroll records. 
Unless payroll records are maintained in such 
manner that a true and accurate identification and 
division bv employer or group member depart- 
ments or divisions or occupational classifications 
can readily be determined for proper rating, the 
entire payroll of that employer or group member 
shall be presumed to be within the classification to 
which the highest workers' compensation insurance 
rate is applicable. 

(b) Each self-insurer shall, within 180 days after 
the end of each calendar year, file with the Com- 
missioner a statement of total workers' compensa- 
tion benefits paid by the self-insurer during the 
reported calendar year, as well as total future 
liability of all open claims, regardless of the dates 
of accidents. 

(O Each year every self-insurer shall file certi- 
fied audited financial statements ei — financial 
condition with the Commissioner. These state 
meats mu s t be certified audits. These statements 
shalL at a minimumr comprise a balance sheet. 
profit and — loss — statement. — artd — a statement — e£ 
change in loss fund position statement of opera- 
tions, statement of cash flows, and all applicable 
notes to the financial statements . Xoncertified 
interim financial statements may be required by the 
Commissioner at the end of any fiscal quarter or 
any calendar month whenever he has good cause to 
believe there has been a deterioration in the finan- 
cial condition of a self-insurer that adversely 
affects the self-insurer's ability to pay expected 
losses. 

id) Extensions may be granted by the Commis- 
sioner for good cause will be limited to one 45-dav 
period . 

Statutory Authority G.S. 58-2-145: 97-93. 

.0607 APPLICATION - EMPLOYERS 

lai Each employer desiring to self-insure shall 
make application to the Commissioner for such 
authority on a form prescribed by the Commission- 
er. This application shall be filed with the Com- 
missioner at least 60 days prior to the desired 
effective date of self-insurer status. The applica- 
tion shall contain an s wer s to all que s tions pro 
pounded be completed and shall be a sworn state- 
ment. Until all requested data has been filed, an 
application is incomplete. 

ibi In addition to the filing of the application, 
compliance with all of the following is required: 
i 1 i The applicant shall provide the Com- 



missioner with certified audited finan- 



(2) 



(3) 



(4} 



15] 



cial statements of financial condition of 
current origin for the most recent re- 
porting period and the two next most 
recent years including, at a minimum, 
a balance sheet, a profit and loss state 
ment. and a statement of change in loss 
fund position, statement of operations. 
a statement of cash flows, and applica- 
ble notes to the financial statements 
prepared on the basis of generally- 
accepted accounting principles consis- 
tently applied. 

Specific excess insurance with policy 
limits and retention amounts acceptable 
to the Commissioner, may be required 
for each applicant. 

Each applicant shall satisfy the Com- 
missioner that either it has. within its 
own organization, ample facilities and 
competent personnel to administer and 
adjust claims, or shall contract with a 
service company to provide these ser- 
vices. 

Each applicant shall submit a summary 
of worker's compensation benefits paid 
for the last three calendar years, as well 
as total future liability of aH open 
claims. This summary' should indicate 
a breakdown as to benefits paid for 
medical and indemnity. 



( 



Each applicant with 20 or more 
full-time employees shall submit a 
certificate or other evidence of safety 
inspection, completed before the appli- 
cation, that certifies that all safety 
requirements of the North Carolina 
Department of Labor have been met. 
(c) Only an applicant whose modified workers" 
compensation insurance premium has reached one 
hundred thousand dollars (S 100.000) per year and 
whose total fixed assets amount to five hundred 
thousand dollars ($500,000) or more is eligible to 
apply for authority to self-insure. For good cause 
shown, the Commissioner may waive the require- 
ment on fixed assets or minimum premium vol- 
ume. In considering the financial strength and 
liquidity of the applicant to comply with the act. 
the Commissioner may consider, among other 
evaluative criteria, the applicant's: organizational 
structure and management background: profit and 
loss history: source and reliability of financial 
information: compensation loss history; number of 
employees: claims administration: excess insur- 
ance: access to excess insurance markets: ratio of 



2273 



7:20 



NORTH CAROLINA REGISTER 



January 15. 1993 



PROPOSED RULES 



current assets to current liabilities; ratio of tangible 
net worth to annual self insurance retention; ratio 
of net worth to annual compensation premium; 
ratio of working capital to total assets; ratio of 
quick assets to current liabilities; ratio of debt to 
tangible net worth; — ratio of total debt to total 
assets; ratio of cash flow to total debt; ratio of new 
s ales to total assets; ratio of new income to total 
assets; ratio of net income to net sales; (if a mer 
cantilc or manufacturing busine ss ) ratio of net 
credit sales to average accounts receivable; ratio of 
income, — before — interest — and — income — taxes, — t© 
annual interest expense; and s uch other meaningful 
significant financial analyses ratios in each case 
that the Commissioner may apply deem appropri- 
ate . 

(d) All financial statement formulations shall be 
provided in such detail as to facilitate application 
of indicated ratio analyses and trend analysis . 

(e) Each applicant shall execute and file with the 
Commissioner an agreement, which shall be part 
of his application, wherein the applicant agrees to 
fully comply with the act and to deposit with the 
Commissioner cash, acceptable securities, or a 
surety bond issued by a corporate surety that will 
guarantee the applicant's compliance with this 
Section and with the act. 

(f) After considering the application and all 
supportive data, the Commissioner shall either 
grant authorization or deny authorization and 
advise the applicant of deficiencies that constitute 
the basis for denial. If the deficiencies are re- 
solved to the Commissioner's satisfaction within 
30 days of the date of Commissioner's notice, 
authorization shall be granted. 

(g) The applicant may, in the discretion of the 
Commissioner, be granted additional time to 
remedy deficiencies in its application in order to 
meet the requirements of this Section. A request 
for an extension of time shall be made in writing 
by the applicant within 30 days after notice of 
denial by the Commissioner. If the Commissioner 
is not satisfied that all requirements of this Section 
have been met. the application shall be considered 
withdrawn. 

(h) Upon meeting the requirements of this 
Section, an applicant shall receive a written certifi- 
cate of authority to self-insure. 

Statutory Authority G.S. 58-2-40; 97-93. 

.0608 DEPOSITS: BONDS: EXCESS 
INSURANCE - EMPLOYERS 

(a) Each employer shall, on or before the 
effective date of operation of its plan of 



self-insurance, deposit with the Commissioner, 
cash or acceptable securities, or post a surety bond 
issued by a corporate surety, in an amount equal to 
ten percent of its total annual premium, but such 
amount shall not be less than two hundred thou 
sand dollars — ($200,000) nor greater than five 
hundred thousand dollars ($500,000). For good 
cause shown, the Commissioner may require a 
bond or deposit in excess of five hundred thousand 
dollars ($500,000h — A surety bond or security 
deposit in excess of two hundred thou s and dollars 
($200,000) may be required by the Commissioner 
depending on the financial status of the employer 
or if the employer has experienced a deterioration 
in financial condition. 

(b) Each employer, shall maintain specific 
excess insurance with a limit of at least one million 

dollars ($1,000,000) five million dollars 

($5,000,000) . Higher limits may be required for 
an employer with a higher risk of multiple injuries 
from a single occurrence. The retention underly- 
ing specific excess policies shall be the lowest 
retention generally available for employers of 
similar size and exposure, but may, in the 
Commissioner's discretion, be established at higher 
levels consistent with the employer's claims expe- 
rience and financial condition. 

Statutory Authority G.S. 58-2-40; 97-93. 

.0609 REPORTS - EMPLOYERS 

(a) A report may be submitted on other than a 
prescribed form only with the prior approval of the 
Commissioner. The deadlines for filing of pre- 
scribed reports are as provided in this Section. 
Reports other than those with prescribed due dates 
shall be filed at such times that the Commissioner 
establishes and, except reports related to financial 
impairment, shall not be required to be filed 
without 30 days prior written notice from the 
Commissioner. 

(b) Copies of all final payroll reports showing 
payrolls by appropriate classification shall be filed. 

(c) Each employer shall promptly report to the 
Commissioner changes in the names and addresses 
of the businesses it self-insures or intends to 
self-insure, as well as changes in its business 
structure, including its divisions, subsidiaries, and 
internal organization. Any such change shall be 
reported in writing to the Commissioner within ten 
days after the effective date of the change. Appro- 
priate endorsements to surety bonds or excess 
insurance policies, or both, that specify any addi- 
tional named insureds shall be filed within 90 days 
of the effective date of the change. Bonds of 



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2274 



PROPOSED RULES 



coverages or cover notes providing for at least 90 
days coverage shall be filed within 30 days after 
the effective date of the change. 

(d) Each employer shall submit a statement of 
financial condition meeting the criteria established 
in this Section within ¥1% 180 days following the 
close of its fiscal year. 

(e) Every employer shall submit on an annual 
basis a report from a recognized actuarial firm 
qualified actuary , of outstanding workers' compen- 
sation liabilities for each fund year. Such report 
shall show liabilities, excess carrier and other 
qualifying credits, if any. and net retained liabili- 
ties. 

(f) All employers shall maintain such payroll 
records that are necessary to complete and verify 
the accuracy of the annual self-insurers payroll 
report. 

fg-t An — employer — that — do es — net — hove — the 

record keeping capability required by this Section 
on October 1 , 1090. shall comply with this Section 
within one ycmr thereafter. 

(g) fh-> Summary loss reports formatted by 
classifications as prescribed in the unit statistical 
plan of the principal workers" compensation rating 
organization in North Carolina shall be filed as 
required by the Commissioner. 

Statutory Authority G. S. 58-2-40; 58-2-145; 97-93. 

.0610 APPLICATION - GROUPS 

(a) Application may be made to provide 
workers' compensation coverage for a group in 
accordance with the terms of an indemnity agree- 
ment. Application shall be made to the Commis- 
sioner for such privilege on forms prescribed by 
the Commissioner and shall be filed with the 
Commissioner at least 60 days prior to the desired 
effective date of self-insured status. The applica- 
tion shall contain answers to all questions pro- 
pounded and shall be a sworn statement. Until all 
requested data has been filed, an application is 
incomplete. 

(b) The application shall include without limita- 
tion to the following: 

(1) a copy of the bylaws of the proposed 
group; 

(2) an individual application of each mem- 
ber of the group applying for coverage 
in the group on the inception date of 
the group; 

(3) a current certified financial statement of 
each group, including at a minimum, a 
balance sheet, a profit and lo ss state- 
ment of operations, a statement of cash 



flows , and a statement showing the 
combined net worth equity of all mem- 
bers applying for coverage on the in- 
ception date of the group. Such com- 
bined net worth shall be an amount that 
establishes the financial strength and 
liquidity of the businesses; 

(4) evidence of the financial ability of the 
group to meet its obligations under the 
act; 

(5) a composite listing of the estimated 
standard premium to be developed for 
each member individually and in total 
as a group. Payroll data for each of the 
three preceding years shall be furnished 
by risk classification; 

(6) documented agreement by each member 
to pay to the group not less than 25 
percent of estimated annual manual 
premium not later than the initial day of 
coverage afforded by the group; 

(7) a confirmation of any required excess 
insurance underwritten by an authorized 
insurer; 

(8) designation of the initial trustees or 
administrator, or both; 

(9) proof of a fidelity bond, issued by an 
authorized insurer, covering the group 
administrator in a form and an amount 
acceptable to the Commissioner; 

(10) an indemnity agreement jointly and 
severally binding the group and each 
member thereof to comply with the 
provisions of the act and pay obliga- 
tions imposed by the act, which shall 
conform to an indemnity agreement in 
a form acceptable to the Commissioner; 

(11) a breakdown of all projected adminis- 
trative expenses for the fund year in 
dollar amount and as a percentage of 
the estimated annual manual premium; 

(12) proof provided by the trustees, satisfac- 
tory to the Commissioner, that the 
annual gross premiums of the group 
will be not less than one hundred thou- 
sand dollars ($100,000); 

(13) proof, satisfactory to the Commission- 
er, that either the applicant has within 
its own organization ample facilities 
and competent personnel to service its 
own program with respect to underwrit- 
ing matters, claims adjusting, and in- 
dustrial safety engineering; or that the 
applicant will contract with a service 
company to provide these services and 



2275 



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PROPOSED RULES 



the reporting of loss data to the Com- 
missioner. If any plan servicing is to 
be done by the applicant, biographies of 
those persons who will be responsible 
for or performing such functions shall 
be submitted to the Commissioner with 
the application; 
(14) a letter of assent stipulating the 
applicant's acceptance of membership 
status in the North Carolina 
Self-Insurance Guaranty Association 
under Article 4 of the act. 

(c) After considering the application and all 
supportive data, the Commissioner shall either 
grant authorization or deny authorization and 
inform the applicant of deficiencies that constitute 
the basis for denial. If the deficiencies are re- 
solved to the Commissioner's satisfaction within 
30 days of the Commissioner's notice, authoriza- 
tion shall be granted to the applicant. 

(d) The applicant may, in the discretion of the 
Commissioner, be granted additional time to 
remedy the deficiencies in its application in order 
to meet the requirements of this Section. A 
request for an extension of time shall be made in 
writing by the applicant within 30 days after notice 
of denial by the Commissioner. If the Commis- 
sioner is not satisfied that all requirements of this 
Section have been met, the application shall be 
considered withdrawn. 

(e) Upon meeting the requirements of this 
Section, the applicant shall receive a written 
certificate of authority to self-insure. 

Statutory Authority G.S. 58-2-145; 97-93. 

.0612 REPORTS - GROUPS 

(a) Reports as to financial condition, payroll 
records, coverage, accident experience, compensa- 
tion payments, and other reports shall be filed with 
the Commissioner as follows: 

( 1 ) Each group shall file with the Commis- 
sioner within 270 180 days after the 
close of the fund year a statement of 
financial condition, which statement 
shall include a report of the outstanding 
workers' compensation liabilities of the 
group, including details of the amount 
and source of all monies recoverable 
from any third party. Financial state- 
ments shall, at a minimum, comprise a 
balance sheet, a profit and loss state- 
ment of operations , and a statement of 
change in group position cash flows . 

(2) Every group shall submit on an annual 



basis a report from a recognized actuar 
ial firm qualified actuary of outstanding 
workers' compensation liabilities for 
each fund year. Such report shall show 
liabilities, excess carrier and other 
qualifying credits, if any, and net re- 
tained liabilities. 
(3) Summary loss reports, formatted by 
classifications as prescribed in the unit 
statistical plan of the principal workers' 
compensation rating organization in 
North Carolina, shall be filed as re- 
quired by the Commissioner. 

(b) The failure or refusal of any group to file 
the reports specified in Paragraph (a) of this Rule 
within the time limits prescribed by this Section or 
by any provision of the act may be grounds for 
revocation, suspension, or nonrenewal of the 
authority to self-insure. 

(c) Every group member shall notify the group 
to which it belongs of any changes in the names, 
addresses, structure, or composition of any busi- 
nesses or subsidiaries that participate in the group. 
Every group member shall notify the group of any 
additions or deletions of the businesses or subsid- 
iaries participating in the group, including changes 
in majority ownership interest in any business or 
subsidiary that is covered or that will be covered 
by the group. All such changes shall be reported 
to the group within ten days after the effective date 
of the change. Upon receipt of such notice, each 
group shall notify the Commissioner, in writing, of 
such reported changes. 

(d) Any group that does not have the 
record-keeping capability required by this Section 
on October 1, 1990, must be in compliance with 
this Section within 90 days thereafter. 

Statutory Authority G. S. 58-2-40; 58-2-145; 97-93. 

.0615 PAYMENT OF DIVIDENDS BY 

GROUP FUNDS OR ASSOCIATIONS 

No group fund or association created under this 
Section shall make any payment of dividends or 
return fund surplus to its members without first 
obtaining written permission from the Commis- 
sioner. 

Statutory Authority G.S. 58-2-40; 97-93 fb). 

SUBCHAPTER 11C - ANALYSIS AND 
EXAMINATIONS 

SECTION .0100 - GENERAL PROVISIONS 



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2276 



PROPOSED RULES 



.0103 REPRODUCTION OF REPORTS ON 
EXAMINATION 

Reports on examination shall be reproduced by 
the company in sufficient quantity to accommodate 
rts the Department's needs, as well as the needs of 
the company. The report shall be reproduced 
within 45 days from the date the report on exami- 
nation becomes a public document; such report to 
be void of any type of advertisements. 



Statutory Authority 
58-65-105. 



G.S. 58-2-40; 58-2-131; 



.0107 REINSURANCE: WHEN PERMITTED 

North Carolina General Statute 58 39.3 authoriz 
es — a company — te — rein s ure it s — ri s k s — aftd — policy 
liabilit i es in any other s olvent insurer hereinafter 
called the a ss uming insurer. — Provided, that in the 
event such — reinsurance is with a company not 
authorized to do business within thi s state and s uch 
company doe s not meet the minimum s tatutory 
requirement s — fef — st*eh — assuming — company — te 



be 



come licen s e 



d in thi s state, the direct writing 



company s hall, notwithstanding s uch rein s urance, 
maintain all the reserves required by s tatute of 
such line of bu s iness under the appropriate liability 
caption for unauthorized rein s urance in the "Asso 
eiation Edition of the Annual Statement Blank." 



Statutory Authority G.S. 58-59.3. 

.0108 DIVIDENDS TO POLICYHOLDERS: 
DEPARTMENT INTERPRETATION 

The North Carolina General Statutes provide that 
no dividend shall be paid unless fair and equitable 
and for the best interest of the company and its 
policyholders. N.C.G.S. 58 97 G.S. 58-8-25 is 
interpreted by the Department to mean that no 
domestic stock or mutual insurance company may 
declare dividends to its policyholders except from 
the earned income or earned surplus of the compa- 
ny as reflected in the company's annual statement 
filed with the Commissioner of Insurance and 
prepared in accordance with statutory accounting 
practices. 

Statutory Authority G.S. 58-2-40; 58-8-25. 

.0109 dividends to stockholders: 
depart:\dint interpretation 

North Carolina General Statute 58 85.1 G.S. 



58-7-130 is interpreted by the Department to mean 
that no domestic stock insurance company may 
declare dividends to its stockholders except from 
the earned income or earned surplus of the compa- 



ny as reflected in the company's annual statement 
filed with the Commissioner and prepared in 
accordance with statutory accounting practices. 
Provided, however, that stock dividends to stock- 
holders out of paid in and contributed surplus will 
be permitted on a case by case basis depending on 
the necessity for a company to distribute such 
stock dividend. 

Statutory Authority G.S. 58-2-40; 58-7-130. 

.0111 INVESTMENT IN THE 

INTERNATIONAL BANK FOR 
RECONST AND DEV 

The United States of America is a member of the 
International Bank for Recon s truction and Dcvel 
opment as authorized by — Public — baw — 171 79th 
Congress, and has s ub s cribed to a portion of the 
capital s tock thereof; and s aid international bank 
ha s offered debentures to inve s tor s in issues of 10 
and 25 year maturities. 

The Comptroller of the Currency, United States 
Trea s ury — Department, — has — authorized — national 
banks to purcha s e s uch debentures subject to the 
limit of 10 percent of their capital and surplus and 



*al- 



investment s for 



such debentures qualify a s 

insurance companies under the statute s or rulings 

of various states, and subject to various limita 

tion s . 

Under — the — North — Carolina — statutes — insurance 
companie s — may — not — inve s t — m — s«eh — debentures 
without the s pecific authorization of the Commis 
sioner of In s urance; however, it is the ruling of 
this department that domestic insurance companie s 
of North Carolina may invest funds, subject to a 
limit of 10 percent of the s urplu s in exce ss of the 
minimum required by statute, of the respective 
company, in debentures of s aid international bank. 

Statutory Authority G.S. 58-9(1); 58-79: 58-79.1. 

.0114 CERTIFICATES OF CONTRIBUTION 

Every domestic insurance company may. upon 
petition to the Commissioner and upon receipt of 
his approval thereof, issue certificates of contribu- 
tion of surplus for the reasons and purposes set 
forth in the petition to the Commissioner. 

Approval of the issuance of certificates of contri- 
butions may be granted only upon the following 
conditions and will be effective only as to transac- 
tions performed in conformity therewith: 
( 1 ) No certificate evidencing the contribution 
under authorization hereof shall be issued 
except substantially in the form and text 
of the "certificate of contribution" de s ig 



2277 



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PROPOSED RULES 



natcd as 1 1 NCAC 1 1 A .0 4 79 as may be 
approved by the Commissioner . 

(2) No commission, selling or other expense 
is to be paid or incurred in respect to any 
transaction authorized, except that regular 
salaried employees of the petitioner may 
perform any and all acts necessary, con- 
venient or advisable in connection with 
the transactions authorized, fees may be 
paid for legal counsel, accounting and 
related services, and petitioner may incur 
and pay other normal expense incurred in 
connection with the issuance of the certif- 
icates of contribution. 

(3) No advertisement, prospectus, or other 
writing relating to the certificates of 
contribution, except regular business 
correspondence relating to specific prob- 
lems peculiar to the parties thereto, shall 
be issued, circulated or published until 
after the same has been filed with and 
authorized in writing by the Commission- 
er. 

(4) At any time upon the request of the 
Commissioner and in any event within 30 
days from and after the issuance of any 
certificate of contribution and after the 
completion of the transactions authorized, 
petitioner shall make and file with said 
commissioner its verified report setting 
forth the transactions accomplished pur- 
suant to the authority granted, and setting 
forth the date of issuance of the certifi- 
cate of contribution, the proceeds derived 
therefrom and the disposition of such 
proceeds, and petitioner shall attach to 
such report a conformed copy of the 
contribution certificates issued pursuant 
to said authorization. 

(5) In any financial statement required by 
law to be filed by petitioner with any 
public — officer the Commissioner , or 
which may be published or distributed by 
petitioner, the principal sum of and ac- 
crued interest of these and any other 
outstanding certificates of contribution, 
which has not become a liability in accor- 
dance with the terms thereof and is not 
reported in such financial statement as a 
liability, shall be reported according to 
the instructions for completing the appro- 
priate annual NAIC financial statement 
blank identified by 1 1 NCAC 1 IE .0102 . 
Such amount shall be reported on the 
appropriate line on page 3 of the annual 



(6) 



(7) 



financial statement either as "contribution 
certificates", "outstanding contribution 
certificates", or "certificates of contribu- 
tion". Other descriptions, such as "de- 
bentures", "surplus notes", "guaranty 
fund", or "guaranteed certificates", are 
deemed misleading and are not permitted. 
The Commissioner may, from time to 
time, for cause amend, continue or alter 
his approval or temporarily suspend the 
rights of the petitioner hereunder or may 
revoke this authority. 
Unless revoked, suspended, or amended 
or continued upon due petition therefor 
filed before the expiration date hereof the 
authority granted hereunder is valid for a 
period of five years and such authority 
shall automatically terminate on the close 
of business on the last day of the month 
in which this authority was originally 
granted. 
Certificates of contribution issued hereunder are 
not to be construed as guaranty fund certificates as 
specifically provided for under N.C.G.S. 58 87 
and 58 96 G.S. 58-12-1 and 58-8-20 . 

Statutory Authority G.S. 58-2-40; 58-7-163. 

.0115 VALUATION OF BONDS AND 
OTHER EVIDENCES OF DEBT 

The provisions of N.C.G.S. 58 80 with respect 
to the valuation of bond s or other evidence s of 



debt he 



]coi naving a fixed term and rate held by any life 
in s urance company, or fraternal benefit association 
are deemed in every way applicable to s uch bond s 
and other evidence of debt held by all other insur 
ance companies licensed to do business in this state 
and which arc s ubject to the provi s ion s of Chapter 
5 8 , in s urance laws of North Carolina. 



Statutory Authority G.S. 58-80. 

.0116 AMORTIZED VALUES OF BONDS 
OR OTHER EVIDENCES OF DEBT 

For the purpo s e of calculating amortized values 
of bond s or other evidence s of debt s pur s uant to 
the provisions of G.S. 58 80, the Commis s ioner 
has determined that acceptable method s of calculat 
ing such amortized values arc either the "straight 
line" method or the "scientific" method of amorti 
zation, whichever is deemed mo s t appropriate by 
the re s pective in s urer s . 

Statutory Authority G.S. 58-80. 



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January 15, 1993 



2278 



PROPOSED RULES 



.0117 CONFLICT OF INTEREST 

STATEMENTS MUST BE EXECUTED 
ANNUALLY 

Conflict of interest statements in the form desig 
natcd as 11 NCAC 1 1 A .0178 shall be executed 
annually by the officers, directors^ trustees, 
attorneys-in-fact, and administrative personnel of 
every domestic insurance company. 

Any conflicts of interest disclosed thereon shall 
be presented to the board of directors or trustees 
of the company for a determination of its accept- 
ability or the remedial disposition thereof. 

Statutory Authority- G.S. 58-2-40. 

.0118 COLLECTION PROCEDURES FOR 
EXAMINATION EXPENSE 

(a) Each examiner will periodically prepare an 
"Examiner"s Expense and Days Worked Report" 
for examinations of each insurance company. An 
examiner participating on the examination of a 
foreign insurance company will forward the origi- 
nals of the reports to the Commissioner of Insur 
anoe periodically and retain copies for the 
examiner's own record. The examiner-in-charge 
on the examination of domestic insurance compa- 
nies will approve and forward the originals of each 
examiner's reports to the Commissioner periodical- 
ly and retain one copy of each report for his 
records. 

(b) Upon verification of the examiner's expense 
reports, the Commissioner or his designee shall 
prepare an invoice and periodically bill the insur- 
ance companies for charges for days worked, as 
well as the expense charges for each examiner. 
All invoices for expenses and daily work charges 
are to be billed directly by the Department of 
In s urance to the company under examination. The 
company is directed by the invoice to submit its 
payments direct directly to the Department of 
Insurance to the company under examination. The 
company is directed by the invoice to submit its 
payments direct to the Department of Insurance for 
both expenses and charges for days worked and to 
make checks payable to the Department of Insur- 
ance. 

(c) All funds received from daily charges are for 
the sole purpose of funding the direct and indirect 
cost of operations of the examination unit Field 
Audit Section of the Financial Evaluation Division 
of the Department . All charges are to be deter- 
mined on a formula basis, to be adjusted from time 
to time as need and circumstances require. 

Statutory Authority G.S. 58-2-40; 58-2-1 33(c). 



.0121 STOCK OPTIONS: GENERAL 

Domestic companies de s iring to sell or purchase 
stock may do so in accordance with the following 
rules. 

However, the following rules shall not restrict 
the purcha s e of options which are permitted under 
the provi s ions of N.C.G.S. 58 70(a)(1 4 ). 



Statutory Authority G.S. 58-79; 58-79. 1. 

.0123 PURCHASE OF EXCHANGE: 
TRADED CALL OPTIONS 

An insurer may purchase an exchanged traded 
call option only through an exchange and only for 
the purpose of a clo s ing purchase transaction. An 
insurer may purchase a call on the same security 
upon which an option was written by the insurer. 
Insurers may not purchase any other option s . 



Statutory Authority G.S. 58-79; 58-79.1. 

.0127 SEVERABILITY 

If any provision of this Rule or the application 
thereof to any per s on or s ituation is held invalid, 
such invalidity s hall not affect any other provi s ion 
or application of thi s Rule which can be given 
effect without th e invalid provi s ion or application 
and to thi s end the provi s ion s of this Rule are 
declared to be severable. 



Statutory Authority G.S. 58-79; 58-79.1. 



.0128 

The 



DEFINITIONS 

following definitions are applicable to Rule s 
to .0127 of this Section 11 NCAC 11C 



.0121 through 11C .0127 ; 

(1) "Call option" means an option contract 
under which the holder of the option has 
the right, in accordance with the terms of 
the option, to purchase the number of 
shares of the underlying stock covered by 
the option contract. 

(2) "Exchange" means a national securities 
exchange registered under the Securities 
Exchange Act of 1934, as amended. 

(3) "Exchange-traded" means traded on the 
floor of an exchange. 

(4) "Escrow receipt" means an escrow re- 
ceipt issued with respect to escrowed 
stock held on deposit by a bank. 

(5) "Escrowed stock" means stock owned by 
an insurance company with respect to 
which an escrow receipt has been issued. 

(6) "Closing purchase transaction" means the 
purchase of an exchange-traded call 



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PROPOSED RULES 



option, the effect of which is to reduce or 
eliminate the obligations of a call option 
writer with respect to an option contract 
or contracts. 

(7) "Stock" means stock owned by a domes- 
tic insurance company which was ac- 
quired subject to the provisions of 
N.C.G.S. 58 79 and 58 79.1 G.S. 
58-7-173 . 

(8) "Underlying stock" means the stock 
subject to being purchased upon the 
exercise of a call option. 

(9) "Exercise price" means the price per unit 
at which the holder of an option may 
purchase the underlying stock upon exer- 
cise. 

Statutory Authority G.S. 58-2-40: 58-7-173. 

.0129 FORM OF REPORTS OF 

EXAMINATION: FOREIGN 
COMPANIES 

The certified reports on examination prepared by 
the domiciliary insurance department of a foreign 
company as a result of a triennial examination, 
special examination or any other type of examina- 
tion of a foreign insurance company licensed to do 
business in North Carolina will be in the form 
adopted and prescribed by the National Association 
of In s urance Commissioner s and i s the only form 
which will be acceptable for filing in this juri s die 
tkm shall be certified . 

Statutory Authority G.S. 58-2-40; 58-2-132. 

.0132 ACCOUNTING FOR SAUVAGE AND 
SUBROGATION 

No insurance company shall take credit in any 
annual or interim financial statement filed with the 
Department for salvage or subrogation recoveries 
until the recoveries have been reduced to cash or 
its equivalent. Salvage or subrogation recoveries 
reduced to cash or its equivalent shall be accounted 
for as an offset to losses paid . 

Statutory Authority G.S. 58-2-40; 58-7-162. 

SECTION .0200 - INVESTMENTS 



.0202 FNVENTORY OF CAPITAU SURPUUS 
AND RESERVE INVESTMENTS 

Every — dome s tic — stock — and — mutual — insurance 
company, other than a life in s urance company or 
fraternal benefit association, must annually compile 
and maintain for review by the Commissioner a 



li s ting 



provisions 



of its investments made pursuant to the 
jns of N.C.G.S. 58 79.1(a). (b) and (c) 
which comprise its minimum capital, if any, it s 
minimum — s urplu s and its reserve — investments. 
Each such company shall also maintain for review 
a li s ting of all investments made pursuant to the 
provisions of N.C.G.S. 58 79.1(d) residue and 
surplus fund investments. 

The listing of the investments in this Rule must 
be prepared in the form de s ignated as 1 1 NCAC 
-H-A — .0 4 77 or in a form — substantially — similar 
thereto. 



Statutory Authority G.S. 58-79.1. 



.0203 



T4k 



FOREIGN FIRE: CASUALTY AND 
MISC COMPANIES: COMPLIANCE 



alien fire. 



rfty 



ie inve s tments ot foreign or alien tire, casual 
and miscellaneous insurance companies seeking 
admi ss ion to or already licensed in North Carolina 
must comply — in sub s tance with the inve s tment 
requirement s and limitations imposed upon like 
dome s tic companies wherever authorized to do the 
same kind or kinds or insurance bu s ines s . 



Statutory Authority G.S. 58-79(d)(l); 58-79.1. 

.0204 INVESTMENTS IN ELECTRONIC 
DATA PROCESSED EQUIPMENT 

It i s the interpretation of this department that 
electronic and mechanical machine s constituting a 
data processing and accounting system is a permi s 
sible investment for insurance companies subject to 
the provi s ion s of N.C.G.S. 58 79.1 if the cost of 
such s ystem i s at lea s t twenty five thou s and dollars 
($25,000). but not more than two percent of its 
admitted assets, and if the cost thereof is amortized 
full over a period not to exceed 10 calendar 



years. 



Statutory Authority G.S. 58-79.1; 58-9(1). 



.0205 ACCOUNTED FOR SALVAGE AND 
SUBROGATION 

Insurance companie s incorporated under the laws 
of this — state — and foreign and — alien — companies 
licensed to do business in this state shall not take 
credit in any annual statement or interim s tatement 
filed with this department for salvage or subroga 
tion recoverie s until such recoveries shall have 
been reduced to cash or its equivalent. — Salvage or 
subrogation — recoveries — reduced — t© — ees-h — &f — its 



equivalent : 
lo ss e s paid. 



hall be accounted for as an offset to 



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January 15, 1993 



2280 



PROPOSED RULES 



Statutory Authority G.S. 58-16; 58-9. 

.0206 ACCOUNTING FOR PREMIUM OVER 
90 DAYS PAST DUE 

Premiums that are not more than 90 days past 

due are allowable as admitted assets under G.S. 

58-7-162(5). For purposes of this determination, 

premiums are considered more than 90 days past 

due under any of the following conditions: 

( 1 ) Original, deposit, and renewal premiums 

on policies and bonds effective more than 

90 days before the date of determination. 

Premiums covering endorsements on 



accordance with this Rule. 



ill 



131 



14) 



ill 



16} 



L7J 



1«J 



which the effective dates were more than 
90 days before the date of determination. 
Installment premium s due more than 90 
days before the date of determination. ]_l 
any installments are overdue, all of the 
unpaid installment premiums on the same 
policy or bond shall be classified as 
overdue. 

Audit and additional earned premiums 
determined by audits made more than 90 
days before the date of determination, or 
charged upon an assured's payroll state- 
ments received more than 90 days before 
the date of determination. 
Audits and additional earned premiums 
determined by audits covering periods 
expiring more than 180 days before the 
date of determination. The dates when 
the periods expire are determined by the 
provisions of the insurance contract. 
When original, deposit, endorsement, or 
audit premiums are overdue, all premi- 
ums subsequently charged on the same 
policies or bonds are overdue. 
When original, deposit, installment en- 
dorsement, or audit premiums on a policy 
or bond are overdue, all premiums 
charged on policies or bonds issued as 
renewals are overdue. 
Premiums resulting from an experience 
modifi cation are admitted assets, provid- 
ed that not more than 90 days have 
elapsed since the modification has been 
received from a rating organization; or 
not more than 90 days have elapsed since 
the modification has been calculated by 
the insurer. Premiums resulting from an 
experience modification are not admitted 
assets if more than 180 days have elapsed 
since the effective date of the policy to 
which they apply or if premiums on the 
same or prior policy are overdue in 



(9) Additional premiums developed through 
the application of a retrospective rating 
formula and billed to the insured in ac- 
cordance with contractual provisions are 
admitted assets; provided that not more 
than 90 days have elapsed since the 
billing date and not more than 180 days 
have elapsed since the accounting date set 
forth in the insurance contract. Addition- 
al retrospective premiums are not admit- 
ted assets if premiums on the same or 
prior policy are overdue jn accordance 
with this Rule. 

Statutory Authority G.S. 58-2-40; 58-7-162(5). 

SECTION .0300 - HEALTH MAINTENANCE 
ORGANIZATIONS 



.0302 



INVENTORY OF RESERVE: 
CAPITAL AND SURPLUS 
INVESTMENTS 



Every domestic stock and mutual life in s urance 
company must annually compile and maintain for 
review by the Commissioner a listing of its invest 
merit s made pur s uant to the provisions of North 
Carolina General Statute 58 79(a) which compri s e 
its entire re s erve s , a s defined by North Carolina 
General Statute 5 8 79(b)(1), its entire capital, if 
any, and minimum required surplus. — The listing 
of s uch inv es tments must be prepared in the form 
d es ignated a s I I NCAC 1 1 A .0 4 75 or in a form 
s ub s tantially s imilar thereto. 



Statutory- Authority G.S. 58-79. 



.0303 EXPLANATION OF BASKET CLAUSE 
N.C.G.S. 58-79(a)(14) 

North Carolina General Statute 58 79(a)(1 4 ) 
affords dome s tic life in s urance companie s further 
leeway in inve s tment s not authorized by statute 
and — is — generally — referred — te — as — the — "Basket 
Clause." — The Basket Clau s e contemplate s and 
intend s a bona fide investment of funds in securi 
tie s , property, loans or otherwise for the purpose 
of producing life insurance income in accordance 
with statutory accounting practice s and statutory 
valuation of s ecuritie s — procedure s . — The — Basket 
Clause — doc s — not — authorize — as — i nve s tment s — the 
tangible property, furniture, fixtures, automobiles, 
typewriters, calculator s and other equipment u s ed 
by a company in the operation of it s bu s iness and 
which was not acquired for the purpo s e of produe 
ing investment income. 



2281 



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PROPOSED RULES 



Statutory Authority G.S. 58-79(a)(14). 

.0304 INVENTORY OF BASKET CLAUSE 
INVESTMENT 



Every dor 



ivcry domestic life insurance company malting 
inve s tments pursuant to the provisions of North 
Carolina General Statute 58 79(n)(1 4 ), generally 
referred to as the Basket Clause for leeway invest 
ments, must annually compile and maintain for 
review by the Commissioner a listing of all Basket 



Claus 



investment s 



The listing of such invest 
ments must be prepared in the form de s ignated as 
11 NCAC 1 1 A .0 4 76 or in a form substantially 
similar thereto. 

Statutory Authority G.S. 58-79(a)(14). 



.0305 CALCULATION OF LIMITATIONS 
ON BASKET CLAUSE INVESTMENTS 

The limitations of inve s tm e nts of dome s tic life 
insurance — companie s — pursuant — to — N.C.G.S. 
58 79(n)(1 4 ) shall be ba s ed on the last annual 
s tatement preceding the date of the acquisition of 
the inve s tment a s filed with the Commi s sioner but 
subject to verification by the Commi ss ioner that 
s aid statement is substantially correct. Should s aid 
statement be found after examination to be matcri 
ally in error the limitations imposed under the 
Basket Clause must be adju s ted accordingly in 
determining eligible inve s tment s thereund e r. 



Statutory Authority G.S. 58-79(a)(]4). 



.0306 



LIMITATIONS UNDER BASKET 
CLAUSE TO PREVIOUS 
LNVESTMENTS 



44fe 



Any — inve s tment of a dome s tic — hrte — insurance 
company — made pur s uant to the provisions and 
limitations of N.C.G.S. 58 79(a)(1 4 ) and which 
wa s a proper and legal investment at the time it 
wa s made, will thereafter remain proper and legal 
regardless of circum s tance s affecting the percent 
age limitations imposed thereunder, e.g.. apprccia 
tion of the inve s tment, deterioration of surplus, 
etc., subject, however, to the appropriatene ss of 
the value a ss igned to the investment which must be 
valued in accordance with — statutory accounting 
practice s . 



Statutory Authority G.S. 58-79(a)(14). 

.0307 FE ASIBILITY STUDY AND MARKET 
SURVEY: HMO 

(a) The applicant shall perform, or cause to be 
performed, a feasibility study as to the potential 



success of the applicant based on the proposed 
plan of operation, territory to be served, extent of 
services to be offered by the applicant, availability 
of and interest by prospective providers, and 
interest and support by the citizenry within the 
area to be served by the applicant. 

lb) As a part of the feasibility study, a market 
survey shall be conducted by qualified personnel of 
the applicant or, if qualified personnel are not 
available, the applicant may cause this survey to 
be conducted by a recognized health care consul- 
tant. This market survey shall realistically esti- 
mate the applicant's potential success and be based 
on logical and sound assumptions. 

(c) The Commissioner must be satisfied that the 
assumptions are proven, the methodology used 
therein is sound and the findings indicate ample 
community support for, and potential success of, 
the applicant. 

Statutory Authority G.S. 58-2-40; 58-67-1 0, 

.0308 FINANCIAL CERTIFICATION: HMO 

After the applicant has performed, or caused to 
be performed, a feasibility study on the proposed 
operations of the HMO and has developed a 
specific plan of operation, this information shall be 
submitted to the applicant's staff actuary, a recog- 
nized actuarial consultant, or a recognized health 
care consultant for completion of an actuarial 
projection of the anticipated operational results for 
a three-year period based on the initial working 
capital of the applicant, any additional sources of 
funds to be provided, the proposed rate schedules, 
the expected number of enrollees during the 
period, and the applicant's plan of operation. This 
projection shall include the following: 
( 1 ) Certification that the amount of money 
actually available for working capital js 
sufficient to carry all acquisition costs 
and operating expenses for at least the 
three-year period and that the applicant is 
financially responsible and may reason- 
ably be expected to meet is obligations to 
enrollees and prospective enrollees on a 
continuing basis; 
Certification that the rates to be charged 



(2) 



£3} 



by the applicant for prepaid health servic- 
es are neither excessive, inadequate nor 
unfairly discriminatory; 
Determination of an adequate reinsurance 
program to amply protect the applicant 
against large claims arising |n cases of 
major health care needs of enrollees, if 
the financial condition of the applicant 



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January 15, 1993 



2282 



PROPOSED RULES 



requires such a program; and 
(4) Consideration be given in the three year 
projection to the possible effects of ad- 
verse selection and over-utilization of 
services by enrollees of the applicant. 

Statutory Authority G.S. 58-2-40; 58-67-10. 

.0309 ISSUANCE OF CERTIFICATES OF 
AUTHORITY: HMO 

(a) A certificate of authority granting the 
applicant authority to operate as an HMO shall be 
issued by the Commissioner upon payment of the 
application fee prescribed in G.S. 58-67-160 and 
upon the Commissioner being fully satisfied that 
the applicant has complied with the provisions of 
G.S. 58. Article 67 and the requirements contained 
herein, and all evidence presented indicates the 
applicant to have a reasonable potential for success 
m the operation of a health maintenance organiza- 
tion. 

(b) Any material filed in accordance with G.S. 
58-67-10 that has materially changed since the 
original date of filing with the Commissioner shall 
be updated and refiled before the granting of a 
certificate of authority. The Commissioner may 
also require any additional information for review 
as he deems necessary in making the decision on 
the issuance of this certificate of authority to the 
applicant. 

(c) Any applicant not domiciled in this State 
must file a power of attorney duly executed by the 
applicant appointing the Commissioner as the true 
and lawful attorney of the applicant upon whom all 
lawful process in any legal action or proceeding 
against the health maintenance organization on a 
cause of action arising in this State may be served. 

Statutory Authority G.S. 58-2-40: 58-67-10; 
58-67-160. 

.0310 FOREIGN HMO: SUCCESSFUL 
OPERATION 

(a) Foreign health maintenance organizations 
seeking admission to North Carolina must have net 
operational gains for three consecutive years next 
preceding the date of application for admission: 
however, on an individual case basis only, an 
applicant may be considered for admission if it has 
a minimum of one year of net operational gains 
and the financial certification as described [n 1 1 
NCAC 1 II .0002 reflects continuing operational 
gains for at least the next three years . 

(b) The three-year operational gain requirement 
for a foreign health maintenance organization 



applying for admission to North Carolina may be 
waived by the Commissioner if such organization 
can satisfy' all other provisions of G.S. 58-67-10 
and the requirements contained herein and if the 
organization js a subsidiary of, or affiliated with. 
an already licensed insurance company that: 

( 1 ) has been licensed in North Carolina for 

a minimum of 10 years; 

has been successful in its insurance 

operations; 



ill 

111 



enjoys a satisfactory reputation in its 
dealings with its North Carolina policy- 
holders: 

(4) has a substantial degree of management 
control over the operations of the appli- 
cant organization; and 

(5) can provide evidence that ample funds 
will be committed by the insurance 
company jn behalf of the health mainte- 
nance organization to support the poten- 
tial success of the organization for at 
least a three-year period. 

Statutory Authority G.S. 58-2-40: 58-67-10. 

.0311 ADMITTED ASSETS: HMO 

For the purpose of determining the working 
capita] or net worth of any HMO seeking admis- 
sion to do business in this State and of any HMO 
admitted to do business in this State, admitted 
assets for an HMO do not include: 



ill 



111 
15} 

16] 



prepaid expenses; 
intangible assets: 

the depreciated cost of furniture and 
equipment, except furniture and equip- 
ment directly used in providing medical 
services and electronic data processing 
equipment: 

amounts receivable from affiliates that 
are outstanding for oxer 90 days; 
amounts recei sable from affiliates that do 
not have immediate resources to repay 
the debts; nor 
any other assets determined by the Com- 



missioner to be of an illiquid nature, 
other than real property. 

Statutory Authority G.S. 58-2-40; 58-2-40(1); 
58-67-20: 58-67-1 10(h). 

.03 12 RELNSURANCE AGREEMENTS: HMO 

Reinsurance Agreements entered into in accor- 
dance with G.S. 58-67-1 10(e) shall be issued by- 
insurance carriers licensed to do business m North 
Carolina. 



2283 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-67-1 10(e). 

.0313 EXPANSION OF SERVICE AREA: 
HMO 

(a) Applications for expansion of service area 
shall provide current data stated in G.S. 
58-67-10(c)(l) along with a feasibility study and 
market survey of the proposed area as stated in 1 1 
NCAC HI .0001. 

(b) Applications for expansion of service area 
must demonstrate at least a minimum of one year 
of net operational gains by the applicant in the 
current approved service area. 

(c) The requirement of Paragraph (b) may be 
waived by the Commissioner if additional capital 
as determined by the Commissioner is placed in 
the HMO, or if a guaranty agreement approved in 
writing by the Commissioner, to pay for any loss 
to enrollees claiming reimbursement due to the 
insolvency of the HMO is made. In order to 
qualify, the guaranteeing organization shall: 

(1) submit to the jurisdiction of this State 
for actions arising under the guarantee; 

(2) submit certified, audited annual finan- 
cial statements to the Commissioner; 
and 

(3) appoint the Commissioner to receive 
service of process in this State. 



two percent of the HMO's statutory net 
worth, whichever is less; 

(3) Changes in contract forms that modify 
elements of risk, or address issues set 
forth in the application for a certificate 
of coverage or any amendments there- 
of, which contract forms include but 
are not limited to, provider contracts, 
subcontracted provider agreements, 
master group forms, administrative 
service agreements, and management 
contracts; and 

(4) The addition of or deletion of types of 
lines of business that an HMO engages 
in. including but not limited to. HMO 
group and individual benefit plans, 
point of service plans, dual option 
plans, triple option plans, medicare 
supplement or wrap around plans, 
medicaid plans, conversion plans, ad- 
ministrative services only arrangements, 
third party administration plans, pre- 
ferred provider organization plans, the 
offering of the HMO through a third 
party to groups, and any arrangement 
that has the potential of increasing the 
liability exposure of the HMO or an 
affiliate. 



Statutory Authority G.S. 58-2-40; 58-67-10. 



Statutory Authority G.S. 58-2-40; 58-67-10(d)(l). 



.0314 FINANCIAL STATEMENTS: HMO 

The annual and quarterly financial reports to be 
filed by HMOs shall be on the HMO Blank as 
adopted by the National Association of Insurance 
Commissioners and shall use such instructions for 
the HMO Blank as may be adopted by the National 
Association of Insurance Commissioners. 

Statutory Authority G.S. 58-2-40; 58-67-55. 



.0316 SERVICE AREA DEFINITION: HMO 

Service area for an HMO is the geographic area 
approved by and on file with the Commissioner. 
It is the only area in which: 

(1) an HMO may enroll members who either 
reside therein or work therein; 

(2) an HMO may contract with providers for 
the provision of health care services; and 

(3) an HMO may market its products. 



.0315 SIGNIFICANT MODIFICATION TO 
OPERATIONS: HMO 

(a) Notification of Significant Modifications of 
the Operations of an HMO as stated in G.S. 
58-67-10(d)(l)and Paragraph (b) of this Rule shall 
be made to the Financial Evaluation Division of 
the Department. 

(b) Significant modifications of the operations of 
an HMO shall also include, but not be limited to: 

(1) Changes in provider panels that would 
affect more than 10 percent of the 
HMO's panel; 

(2) Expenditures of capital in excess of one 
hundred thousand dollars ($100,000) or 



Statutory Authority 
58-67-35. 



G.S. 58-2-40; 58-67-10; 



.0317 SINGLE SERVICE DEFINITION: 
HMO 

A single service HMO is an HMO that under- 
takes to provide or arrange for the delivery of only 
a single type of health care service to enrollees on 
a prepaid basis, except for enrollees' responsibility 
for copayments and deductibles. 



Statutory Authority 
58-67-20; 58-67-25. 



G. S. 58-2-40; 58-67-5; 



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January 15, 1993 



2284 



PROPOSED RULES 



SECTION .0400 - MORTGAGE 
GUARANTY EVSURANCE 

.0403 ACCOUNTING FOR MORTGAGE 
GUARANTY EVSURANCE 

(a) The financial statement required by G.S. 
S&-24 G.S. 58-2-165 shall be furnished on the 
NAIC Fire and Casualty Annual Statement Blank 
designated in 11 NCAC 1 1 A .0 4 11 . Expenses 
shall be recorded and reported in accordance with 
the "Uniform Classification of Expenses of Fire 
and Marine Casualty and Surety Insurers." 

(b) The unearned premium reserve shall be 
computed as follows: 

(1) The unearned premium reserve for 
premiums paid in advance annually 
shall be calculated on the monthly pro 
rata fractional basis. 

(2) Premiums paid in advance for 10 year 
coverage shall be placed in the un- 
earned premium reserve and shall be 
released from this reserve as follows: 

(A) first month - 1/132; 

(B) 2nd through 12th month - 2/132 each 
month; 

(C) 13th month - 3/264; 

(D) 14th through 120th month - 1/132 
per month; 

(E) 121st month - 1/264. 

(3) Premiums Paid in Advance for Periods 
in Excess of 10 Years. During the first 
10 years of coverage the unearned 
portion of the premium shall be the 
premium collected minus an amount 
equal to the premium that would have 
been earned had the applicable premium 
for 10 years coverage been received. 
The premium remaining after 10 years 
shall be released from the unearned 
premium reserve monthly pro rata over 
the remaining term of coverage. 

(c) Fifty percent of the premium remaining after 
establishment of the premium reserve specified in 
Paragraph (b) of this Rule, shall be maintained as 
a special contingency reservation of premium and 
reported in the financial statement as a liability. 

(d) The case basis method shall be used to 
determine the loss reserve, which shall include a 
reserve for claims reported and unpaid and a 
reserve for claims incurred but not reported. 

Statutory Authority G.S. 58-2-40: 58-2-165. 

SECTION .0500 - REINSURANCE 



.0501 ACCREDITED REINSURER - 
APPLICATION 

(a) Each insurance company desiring a status of 
accredited reinsurer in this jurisdiction must file an 
Application for Accredited Reinsurer in the form 
described in JJ_ NCAC 1 1 A .0494 and must satisfy 
the requirements of G.S. 58-7-21 (b)(2). 

(b) Each applicant must reflect verifiable 
policyholders' surplus of at least twenty million 
dollars ($20.000.000) in its most recent annual 
financial statement that presents the applicant's 
assets, liabilities, policyholders' surplus, income, 
and expenses in substantial compliance with appro- 
priate NAIC Annual Statement Instructions. G.S. 
58. and this Title. However, an insurance compa- 
ny may be considered for accredited reinsurer 
status with policyholders' surplus of less than 
twenty million dollars ($20,000,000) if the applica- 
tion includes proper support that adequate protec- 
tion to ceding insurers will be provided by the 
lesser amount of policyholders' surplus. 

Statutory Authority G.S. 58-2-40; 58-7-21 -(b)(2). 

.0502 ACCREDITED REINSURER - FILING 
REQUIREMENTS 

(a) Each initial application for accredited rein- 
surer shall be accompanied by the following 
financial and general information so that verifica- 
tion of the applicant's qualifications may be ac- 
complished: 



ID 

(21 
£31 
(41 

15) 



Annual statements for the preceding 
two years in the form required under 
G.S. 58-2-165; 

A certified copy of the applicant's latest 
Report on Examination; 
A copy of the applicant's CPA report 
for the most recent year: 
Actuarial certification of the applicant's 
loss reserves and loss adjustment ex- 
pense reserves for the most recent year: 
and 

A certificate of compliance from the 

home state verifying that the applicant 

is licensed in at least one state. 

(b) Each insurance company accepted as an 

accredited reinsurer must file on or before March 

1 of each year the following information for 

review and determination of continued acceptabili- 

ty for such status: 

( 1 ) An Application for Accredited Reinsur- 
er for the next fiscal year beginning 
July h 

(2) The applicant's annual statement for the 
preceding year ended December 3 1 in 



2285 



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January 15, 1993 



PROPOSED RULES 



the form required under G.S. 58-2-165; 

(3) The applicant's CPA report for the 
preceding year ended December 31; 

(4) Certification of the applicant's loss 
reserves and loss adjustment expense 
reserves [n such form as required by 
the NAIC Annual Statement Instruc- 
tions except as amended by the Com- 
missioner by rule or directive for the 
preceding year ended December 31; 
and 

(5) A current certificate of compliance. 

Statutory' Authority G.S. 58-2-40; 58-7-21 (b)(2). 

.0503 ACCREDITED REINSURER - 

REVOCATION OF ACCREDITATION 

The Commissioner may revoke the accreditation 
of a reinsurer if its policyholders 1 surplus falls 
below twenty million dollars ($20,000,000) and its 
continued status as an accredited reinsurer is 
deemed to present a condition that [s hazardous to 
the insurance public of North Carolina. 

Statutory Authority G.S. 58-2-40; 58-7-21 (b)(2). 

SECTION .0600 - PREMIUMS IN THE 
COURSE OF COLLECTION 

.0601 DEFINITIONS 

The definitions contained in G.S. 58-19-5 are 
incorporated into this Section by reference. 

Statutory Authority G.S. 58-2-40; 58-7-162. 

.0602 APPLICABILITY 

G.S. 58-7-162(6) applies when a person solely or 
in combination with the person's affiliates owes, in 
any two of three consecutive months, an insurer an 
amount th at exceeds five percent of the insurer's 
total premiums in course of collection. 

Statutory Authority G.S. 58-2-40; 58-7-162. 

.0603 COMPLIANCE-TRUST ACCOUNT 

(a) When G.S. 58-7-162(6) applies under _M 
NCAC 1 1C .0602, the premiums collected by the 
person or the person and its affiliates and not 
remitted to the insurer may be held in a trust 
account with a bank so that those premiums will 
qualify as allowable or admitted assets. 

(b) The trust account shall be an account held in 
the trust department of a bank and evidenced by a 
written trust agreement that is in substantial com- 
pliance with the Department's Model Trust Agree- 



ment. 

(c) The trustee bank shall be a national bank or 
a state chartered bank that is a member of the 
Federal Deposit Insurance Corporation and be 
independent from control of either the person, the 
person's affiliates, or the insurer. 

(d) The trust account must be established within 
60 days after the end of the month in which the 
insurer becomes subject to G.S. 58-7-162(6) under 
ii NCAC 1IC .0602. The trust agreement must 
be submitted to and approved by the Commission- 
er before becoming effective, and within that 
60-day period. 

(e) The person and its affiliates must maintain 
separate trust accounts, evidenced by written trust 
agreements, for each insurer subject to G.S. 
58-7-162(6). 

(f) Once a trust account is established, it shall be 
maintained: 

(1 ) for as long as the person or its affiliates 
produce business for the insurer, re- 
gardless of whether the person or its 
affiliates continue to owe the insurer at 
least five percent of the insurer's total 
premiums in course of collection; or 

(2) until the insurer requests and receives 
authority from the Commissioner to 
cease using the trust account for the 
person or its affiliates . Such request 
shall not be made before 12 months 
after establishing the trust account. 

Statutory Authority G.S. 58-2-40; 58-7-162. 

. 0604 COMPLIANCE: LETTER OF CREDIT 

(a) When G.S. 58-7-162(6) applies under H. 
NCAC 11C .0602, the premiums collected by the 
person or the person and its affiliates and not 
remitted to the insurer may be secured by an 
unexpired, clean, irrevocable letter of credit, 
payable to the insurer, so that those premiums will 
qualify as allowable or admitted assets. 

(b) The amount of the letter of credit shall at all 
times equal or exceed 125 percent of the liability 
of the person or the person and its affiliates to the 
insurer for the premiums collected. 

(c) The letter of credit must be issued within 30 
days after the end of the month in which the 
insurer becomes subject to G.S. 58-7-162(6) under 
11 NCAC 11C .0602. A certified copy of the 
executed letter of credit shall be provided to the 
Commissioner. 

(d) The letter of credit shall be issued by a 
banking institution whose financial condition has 
been determined by either the Commissioner or the 



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January 15, 1993 



2286 



PROPOSED RULES 



Securities Valuation Office of the N'AIC to be 
acceptable to issue such a letter of credit. 

Statutory Authority* G.S. 58-2-40; 58-7-162. 

.0605 COMPLIANCE: FINANCIAL 
GUARANTY BOND 

(a) When G.S. 58-7-162(6) applies under 11 
NCAC 11C .0602. the premiums collected bv the 
person or the person and its affiliates and not 
remitted to the insurer may be secured by a finan- 
cial guaranty bond acceptable to the Department, 
payable to the insurer, so that those premiums will 
qualify as allowable or admitted assets. 

(b) The amount of the financial guaranty bond 
shall at aH times equal or exceed 125 percent of 
the liability of the person or the person and its 
affiliates to the insurer for the premiums collected. 

(c) The financial guaranty bond must be issued 
within 30 days after the end of the month in which 
the insurer becomes subject to G.S. 58-7- 162(6) 
under 11 NCAC 1 1C .0602. A certified copy of 
the executed financial guaranty bond shall be 
provided to the Commissioner. 

Statutory Authority G.S. 58-2-40; 58-7-162. 

SUBCHAPTER 11D - PROXY: 
LIQUIDATION AND MERGER 

SECTION .0100 - GENERAL PROVISIONS 



notice to the attorney in fact so that he may appear 
and show cau s e why such action should not be 
taken. 

If the license of a foreign reciprocal insurer is 
revoked or suspended by the Commissioner, notice 
of such revocation or suspen s ion shall be given in 
the manner and form prescribed by 1 1 NCAC 1 ID 
.0103 and 11 NCAC 1 [A .0 4 56 "respectively. 



Statutory Authority G.S. 58-147. 

.0106 EXTENSION FOR ELIMINATION: 
IMPAIRMENT OF CAP AND 
SURPLUS 

At the expiration of the period set bv the Com 
mi ss ioner — pursuant to — North — Carolina General 
Statute 58 77(10) to eliminate an impairment of a 
dome s tic company' s capital and/or surplus, but not 
more than 90 day s , and s uch impairment has not 
been eliminated, the Commi ss ioner shall revoke 
the authority of the dome s tic company to transact 
any new business and the Commissioner may enter 
an order for rehabilitation or liquidation or grant 
an extension of time not to exceed an additional 30 
day s . — If an extension is allowed and the impair 
ment i s not eliminated at its expiration, the Com - 
missioner shall enter an order for either rehabilita 
tion or liquidation as he deem s appropriate under 
the circumstances. 



Statutory Authority G.S. 58-77(10); 58-82. 



.0104 APPLICABILITY OF LAWS AFTER 
REVOCATION OR SUSPENSION 

If the Commissioner of Insurance of this state 
revokes or suspends the license of a foreign insur- 
ance company to do any new business in this state, 
said company shall remain subject to the provi- 
sions of Chapter 58 of the General Statutes of 
North Carolina for the intent and purpose of 
properly servicing the existing business within this 
state. Specifically, such company having been 
suspended from doing any new business in this 
state, shall remain subject to the provisions of 
Article ±4JZ 48. "Insurance Guaranty Association 
Act" and Article 4-7C 1 62. " North Carolina Life 
and Accident — aftti Health Insurance Guaranty 
Association Act." whichever is applicable. 

Statutory Authority G.S. 58-2-40; 58-3-90. 

.0105 REVOCATION OF LICENSE OF 
RECIPROCAL INSURER 

The — licen s e — of a — reciprocal — insurer — may — be 
revoked or s u s pended after at lea s t 20 days written 



.0108 NOTICE OF HEARING ON PLAN OF 
EXCHANGE OF CAPITAL STOCK 

Notice of a public hearing upon the terms, 
conditions and provisions of a plan of exchange of 
capital stock shall be published and mailed in 
accordance with the provisions of North Carolina 
General Statute 58 86. 4 and s hall be in the form 
designated a s 11 NCAC I1A .0 4 80 G.S. 58-9-5 . 

Statutory Authority G.S. 58-2-40; 58-9-5. 

.0109 CHARGES FOR HEARING 

CONDUCTED PURSUANT TO 
G.S. 58-9-5 

The costs of a public hearing, and the 
department's preliminary work relative thereto, 
shall be assessed upon the petitioners on the basis 
specified in the plan of exchange for any expenses 
incurred therefor. The Department will be reim- 
bursed for the total number of man days expended 
for preliminary work and for the actual hearing 
and the amount charged shall be at the same rate 
charged to insurance companies for the examina- 



2287 



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January 15, 1993 



PROPOSED RULES 



tion of their books and records pur s uant to 1 1 
NCAC 11C .0118 . 

Statutory Authority G.S. 58-2-40; 58-9-5. 

.0111 CERTIFICATE OF INCORPORATION 
AND AMENDMENTS: APPROVAL 

To insure compliance with the provisions of 
Article 44 26 of Chapter 58, the certificate of 
incorporation of a proposed domestic title insur- 
ance company must be approved by the Commis- 
sioner before filing with the Office of the Secre- 
tary of State. 

In order that the corporate files of the Depart- 
ment of Insurance will properly reflect the corpo- 
rate changes of a domestic title insurance compa- 
ny, all amendments to the certificate of incorpora- 
tion must be approved by the Commissioner before 
filing with the Office of the Secretary of States 
even — though — North — Carolina — General — Statute 
58 1 32 appear s to exempt s uch companie s from the 
application of the provi s ions of Chapter 58 except 
to the extent provided in Article 1 4. 



.0114 MINIMUM REQUIREMENTS: 
RECIPROCAL OR INTER-INS 
EXCHANGES 

When the attorney in fact for a proposed recipro 
eal — ef — inter insurance — exchange — maintains — the 
central office in North Carolina it may be permit 
ted to exchange contracts with les s er requirements 
than provided by North Carolina General Statute 
5 8 139(6) — subject — t© — the — following — minimum 
requirements below which no contracts may be 
exchanged: 

fT) Applications shall have been made for 

indemnity upon at least 50 separate risk s 
aggregating not less than seven hundred 
and fifty thousand dollars ($750,000) as 
repre s ented by executed contracts or bona 
fide applications to become concurrently 
effective; or in case of liability or com 
pensation — in s urance — covering — a — total 
payroll of not le ss than s even hundred 
and fifty thousand dollars ($750,000); 



m- 



U.MG 

There 



-ee- 



Statutory Authority 
58-26-5. 



G.S. 58-2-40; 58-26-1; 



deposit w+th the 

attorney in fact and available for payment 
of losse s a sum of not leas than fifty 
thousand dollars ($50,000). 



.0112 DOMESTIC STOCK TITLE INS 
COMPANIES: CAPITAL 
REQUIREMENTS 

In order that the corporate files of the Depart- 
ment of Insurance will properly reflect all capital 
stock changes, domestic stock title insurance 
companies must comply with the provisions of 
North Carolina General Statute 58 81 to — 84 ; even 
though North Carolina General Statute 5 8 132 
appear s to exempt such companies from the appli 
cation of the provi s ions of Chapter 5 8 except to 
the extent provided in Article 1 4 G.S. 58-7-105 
through 5 8-7-120 . 

Statutory Authority G.S. 58-2-40; 58-7-105 to 
-120; 58-26-5. 



.01 13 SUBSCRIBERS OF RECIPROCAL OR 
INTER-INSURANCE EXCHANGES 

The application from each s ubscriber required 
pursuant — to — North — Carolina — General — Statute 
58 139(6) mu s t include an agreement that he will 
take the contract s ub s cribed for by him within 30 
days after the granting of a licen s e to the recipro 
eal — in s urer by — the — Commissioner to — exchange 
contracts. 



Statutory Authority G.S. 58-142. 



Statutory Authority G.S. 58-139(6). 

.0118 PROXIES: DEFINITIONS AND 
INSTRUCTIONS 

(a) The definitions and instructions set out in 
Schedule SIS, as promulgated by the National 
Association — of- — In s urance — Commi s sioners, — and 
designated as 11 NCAC 11A .0 4 31, NAIC shall be 
applicable for purposes of these Rules this Section . 

(b) The terms "solicit" and "solicitation" for 
purposes of these rulc3 shall include this Section 
includes: 

any request for a proxy, whether or not 
accompanied by or included in a form 
of proxy; or 

any request to execute or not to exe- 
cute, or to revoke, a proxy; or 
the furnishing of a proxy or other com- 
munication to security holders under 
circumstances reasonably calculated to 
result in the procurement, withholding 
or revocation of a proxy. 

(c) The terms "solicit" and "solicitation" shall 
not include: 

(1) any solicitation by a person in respect 
of equity security of which he is the 
beneficial owner; 

(2) action by a broker or other person in 



(1) 

(2) 
(3) 



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January 15, 1993 



2288 



PROPOSED RULES 



respect to equity security carried in his 
name or in the name of his nominee in 
forwarding to the beneficial owner of 
such equity security soliciting material 
received from the company, or impar- 
tially instructing such beneficial owner 
to forward a proxy to the person, if 
any. to whom the beneficial owner 
desires to give a proxy, or impartially 
requesting instructions from the benefi- 
cial owner with respect to the authority 
to be conferred by the proxy and stating 
that a proxy will be given if the instruc- 
tions are received by a certain date; 
(3) the furnishing of a form of proxy to a 
security holder upon the unsolicited 
request of such security holder, or the 
performance by any person of ministeri- 
al acts on behalf of a person soliciting 
a proxy. 

Statutory Authority G.S. 58-2-40. 

.0145 INSIDER TRADING OF STOCK: 
DEFLNITIONS 

(a) The following definitions contained in this 
Rule are applicable to insider trading of equity 
securities of a domestic stock insurance company 
as contained in 1 1 NCAC 1 ID .0145 to 1 1 NCAC 
I ID .0167. 

(b) Insurer. "Insurer" means any domestic stock 
insurance company with an equity security subject 
to the provisions of General Statutes 58 86.2 G.S. 
58-7-145 and not exempt thereunder. 

(c) Act. "Act" means General Statut es 58 86.2 
G.S. 58-7-145 . 

(d) Officer. "Officer" means a president, vice 
president, treasurer, actuary, secretary, controller 
and any other person who performs for the insurer 
functions corresponding to those performed by the 
foregoing officer. 

(e) Equity Security. "Equity Security" means 
any stock or similar security; or any voting trust 
certificate or certificate of deposit for such a 
securitv; or any security convertible, with or 
without consideration, into such a security, or 
carrying any warrant or right to subscribe to or 
purchase such a security; or any such warrant or 
right. 

(f) Securities Held of Record. "Securities held 
of record" shall mean: 

( 1 ) For the purpose of determining whether 
the equity securities of an insurer are 
held of record by 100 or more persons, 
securities shall be deemed to be held of 



record by each person who is identified 
as the owner of such securities on 
records of security holders maintained 
by or on behalf of the insurer, subject 
to the following: 

(A) In any case where the records of 
security holders have not been main- 
tained in accordance with accepted 
practice, any additional person who 
would be identified as such an owner 
on such records if they had been 
maintained in accordance with accept- 
ed practice shall be included as a 
holder of record. 

(B) Securities identified as held of record 
by a corporation, a partnership, a 
trust whether or not the trustees are 
named, or other organization shall be 
included as so held by one person. 

(C) Securities identified as held of record 
by one or more persons as trustees, 
executors, guardians, custodians or in 
other fiduciary capacities with respect 
to a single trust, estate or account 
shall be included as held of record by 
one person. 

(D) Securities held by two or more per- 
sons as co-owners shall be included as 
held by one person. 

(E) Each outstanding unregistered or 
bearer certificate shall be included as 
held of record by a separate person, 
except to the extent that the insurer 
can establish that, if such securities 
were registered, they would be held 
of record, under the provisions of this 
Rule, by a lesser number of persons. 

(F) Securities registered in substantially 
similar names where the insurer has 
reason to believe because of the ad- 
dress or other indications that such 
names represent the same person, may 
be included as held of record by one 
person. 

(2) Notwithstanding the provisions of Para- 
graph (f) ( 1 ) of this Rule: 
(A) Securities held, to the knowledge of 
the insurer, subject to a voting trust, 
deposit agreement or similar arrange- 
ment shall be included as held of 
record by the record holders of the 
\oting trust certificates, certificates of 
deposit, receipts or similar evidences 
of interest in such securities; provided 
however, that the insurer may relv in 



2289 



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January 15, 1993 



PROPOSED RULES 



good faith on such information as is 
received in response to its request 
from a nonaffiliated insurer of the 
certificates or evidences of interest. 
(B) If the insurer knows or have reason to 
know that the form of holding securi- 
ties of record is used primarily to 
circumvent the provisions of the act, 
the beneficial owners of such securi- 
ties shall be deemed to be the record 
owners thereof, 
(g) Class. "Class" means all securities of an 
insurer which are of substantially similar character 
and the holders of which enjoy substantially 
similar rights and privileges. 

Statutory Authority G.S. 58-2-40; 58-7-145. 

.0146 WHO MUST FILE UNDER INSIDER 
TRADING OF STOCK 

Every person who is directly or indirectly the 
beneficial owner of more than 10 percent of any 
class of any equity security of a domestic stock 
insurance company or who is a director or an 
officer of such company, shall file in the office of 
the Commissioner within 10 days after he becomes 
such beneficial owner, director or officer, a state- 
ment in such form as described in 11 NCAC 1 1 A 
.0 4 5 4 prescribed by the Commissioner . 

Statutory Authority G.S. 58-2-40; 58-7-145. 

.0147 WHAT MUST BE FILED UNDER 
INSIDER TRADING OF STOCK 

(a) The initial statements of beneficial ownership 
of equity securities required by 11 NCAC 1 ID 
.0147 shall be filed on Form A, 11 NCAC 1 1 A 
.0 4 5 4 a form as prescribed by the Commissioner . 
Statements of changes in such beneficial ownership 
as required by G.S. 5 8 8 6.2 58-7-145 shall be 
filed on Form B, 11 NCAC 1 1 A .0 4 55 a form as 
prescribed by the Commissioner . All such state- 
ments shall be prepared and filed in accordance 
with the requirements of the applicable form. 

(b) Any director or officer who is required to 
file a statement of Form B, 11 NCAC 1 1 A .0 4 55 
with respect to any change in his beneficial owner- 
ship of equity securities which occurs within six 
months after he became a director or officer of the 
issuer of such securities, or within six months after 
equity securities of such issuer first became subject 
to the provisions of the act, shall include in the 
first such statement the information called for by 
Form B, 11 NCAC 1 1A .0 4 55 with respect to all 
changes in his beneficial ownership of equity 



securities of such issuer which occurred within six 
months prior to the date of the changes which 
requires the filing of such statement. 

(c) Any person who has ceased to be a director 
or officer of an issuer which has equity securities 
subject to the provisions of the act, shall file a 
statement on Form B, 11 NCAC I1A .0 4 55 with 
respect to any change in his beneficial ownership 
of equity securities of such issuer which shall 
occur on or after the date on which he ceased to 
be such director or officer, or the date on which 
the issuer ceased to have any equity securities 
subject to the provisions of the act, as the case 
may be. if such change shall occur within six 
months after any change in his beneficial owner- 
ship of such securities prior to such date. The 
statement of Form B, 11 NCAC 1 1 A .0 4 55 shall 
be filed within 10 days after the end of the month 
in which the reported change in beneficial owner- 
ship occurs. 

Statutory Authority G.S. 58-2-40; 58-7-145. 

.0159 EXEMPTION OF LONG TERM 

PROFITS WITHIN SIX MONTHS OF 
OPTION 

(a) To the extent specified in Paragraph (b) of 
this Rule the commissioner hereby exempts as not 
comprehended contemplated within the purposes of 
subsection (b) of the act any transaction or transac- 
tions involving the purchase and sale, or sale and 
purchase, of any equity security where such 
purchase is pursuant to the exercise of an option or 
similar right either: 

( 1 ) acquired more than six months before 
its exercise, or 

(2) acquired pursuant to the terms of an 
employment contract entered into more 
than six months before its exercise. 

(b) In respect of transactions specified in Para- 
graph (a) of this Rule, the profits inuring to the 
insurer shall not exceed the difference between the 
proceeds of sale and the lowest market price of 
any security of the same class within six months 
before or after the date of sale. Nothing in this 
Rule shall be deemed to enlarge the amount of 
profit which would inure to each insurer in the 
absence of this Rule. 

(c) The Commissioner also hereby exempts, as 
not comprehended contemplated within the purpose 
of subsection (b) of the act. the disposition of a 
security, purchased in a transaction specified in 
Paragraph (a) of this Rule pursuant to a plan or 
agreement for merger or consolidation, or reclassi- 
fication of the insurer's securities, or for the 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2290 



PROPOSED RULES 



exchange of its securities, or for the securities of 
another person which has acquired its assets, or 
which is in control, as defined in Section 368(c) of 
the Internal Revenue Code of 1954, of a person 
which has acquired its assets, where the terms of 
such plan or agreement are binding upon all 
stockholders of the insurer except to the extent that 
dissenting stockholders may be entitled, under 
statutory provisions or provisions contained in the 
certificate of incorporation, to receive the ap- 
praised or fair value of their holdings. 

(d) The exemption provided by this Rule shall 
not applv to any transaction made unlawful by 
subsection (c) of the act or by any rules and 
regulations thereunder. 

(e) The burden of establishing market price of a 
security for the purpose of this Rule shall rest 
upon the person claiming the exemption. 

Statutory Authority G.S. 58-2-40; 58-7-145. 

.0160 EXEMPTIONS: ACQUISITIONS: 
DISPOSITIONS PURSUANT TO 
.MERGER 

(a) The following transactions shall be exempt 
from the provisions of subsection (b) of the act as 
not comprehended contemplated within the purpose 
of said section: 

( 1 ) the acquisition of a security of an insur- 
er, pursuant to a merger or consolida- 
tion, in exchange for a security of a 
company which, prior to said merger or 
consolidation, owned 85 percent or 
more of the equity securities of all 
other companies involved in the merger 
or consolidation except, in the case of 
consolidation, the resulting company: 

(2) the disposition of a security, pursuant to 
a merger or consolidation of an insurer 
which, prior to said merger or consoli- 
dation, owned 85 percent or more of 
the equity securities of all other compa- 
nies involved in the merger or consoli- 
dation of all other companies involved 
in the merger or consolidation except, 
in the case of consolidation, the result- 
ing company; 

(3) the acquisition of a security of an insur- 
er, pursuant to a merger or consolida- 
tion, in exchange for a security of a 
company which, prior to said merger or 
consolidation, held 85 percent of the 
combined assets of all the companies 
undergoing merger or consolidation, 
computed according to their book val- 



ues prior to the merger or consolida- 
tion, as determined by reference to 
their most recent available financial 
statements for a 12 month period prior 
to the merger or consolidation; 
(4) the disposition of a security, pursuant to 
a merger or consolidation, of an insurer 
which, prior to said merger or consoli- 
dation, held over 85 percent of the 
combined assets of all the companies 
undergoing merger or consolidation, 
computed according to their book val- 
ues prior to merger or consolidation, as 
determined by reference to their most 
recent available financial statements for 
a 12 month period prior to the merger 
or consolidation. 

(b) A merger within the meaning of this Rule 
shall include the sale or purchase of substantially 
all the assets of one insurer by another in exchange 
for stock which is then distributed to the security- 
holders of the insurer which sold its assets. 

(c) Notwithstanding the foregoing, if an officer, 
director or stockholder shall make any purchase 
(other than a purchase exempted by this Rule) of 
a security in any company involved in the merger 
or consolidation and any sale (other than a sale 
exempted by this Rule) of a security in any other 
company involved in the merger or consolidation 
within any period of less than six months during 
which the merger or consolidation took place, the 
exemption provided by this Rule shall be unavail- 
able to such officer, director, or stockholder to the 
extent of such purchase and sale. 

Statutory Authority G.S. 58-2-40; 58-7-145. 

SECTION .0200 - LIQUIDATION: 
GENERAL NATURE 

.0202 REPLACEMENT POLICIES 

In the event of the appointment of a receiver for 
any insurance company licensed to do busines s in 
North Carolina, or whore an insurance company 
licensed in this state s hall become insolvent or 
bankrupt or shall make a s signment for the benefit 
of it s creditors, — policies i ss ued to replace the 
policies of s uch company may be written on pro 
rata ba s is to the expirat i on date of the replaced 
policy. — Claims for reimbursement by agents who 
issue replacement policies s hall be ev i denced by a 
notarized a ss ignment of the return premium exc 
cuted hv the assured to whom a paid up replace 
ment ha s been delivered. 



2291 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Statutory Authority G.S. 58-9.1. 

SECTION .0300 - MERGER: GENERAL 
NATURE 

.0303 NOTICE OF PUBLIC HEARING ON 
PLAN OF MERGER 

Written notice of the public hearing on a plan of 
merger or consolidation shall be given to the 
stockholders of the merging or consolidating 
companies at least 20 days before the date of the 
hearing. 

In addition, notice shall be published by the 
domestic companies once a week for two consecu- 
tive weeks with the last publication date not less 
than 20 days before the date of the hearing and 
shall be published in the major morning newspa- 
pers in the Cities of Wilmington, Raleigh, Greens- 
boro, Charlotte, and Asheville, North Carolina, 
and the location of the principal office of the 
domestic companies, if other than the aforemen- 
tioned. 

Both written and published notice shall be in the 
form designated as 1 1 NCAC 1 1 A .0 4 81 a form as 
prescribed by the Commissioner . 

Statutory Authority G. S. 55-62; 58-2-40; 58-7-150. 

.0305 NOTICE OF PUBLIC HEARING ON 
PLAN OF MERGER 

Written notices of the date, time and place of the 
public hearing on a plan of merger or consolida- 
tion of a domestic mutual company shall be includ- 
ed in the notice of the special meeting of the 
policyholders called to vote on said plan. Notice 
shall also be published by the domestic companies 
once a week for two consecutive weeks with the 
last publication date not less than 20 days before 
the date of the hearing and shall be published in 
the major morning newspapers in the Cities of 
Wilmington, Raleigh, Greensboro, Charlotte and 
Asheville, North Carolina and cities wherein the 
principal offices of the domestic companies are 
located, if other than the aforementioned. Pub- 
lished notice shall be in the form designated as 1 1 
NCAC 11A .0 4 81 a form as prescribed by the 
Commissioner . 

Statutory Authority G.S. 58-2-40; 58-7-150. 

SUBCHAPTER HE - TAX AND 
MISCELLANEOUS 

SECTION .0100 - GENERAL PROVISIONS 



.0102 



For 



ANNUAL STATEMENTS TO BE 
FILED WITH DEPARTMENT OF 
INSURANCE 



compliance with the annual reporting re 
quirement s of Chapters 57, 57A and 58 of the 
General Statutes the Department require s the use 
of the annual statement forms adopted by the 
National Association of Insurance Commissioners 
for each year's end. and as amended and revised 
from time to time, for the following types of 
companies and in the forma designated in this Rule 
for each type annual statement: 



W- 



Life and Accident and Health — Annual 



Statements Blank: 11 NCAC 1 1 A .0 4 15; 
(3) Fife — and — Casualty — Annual — Statement 



Bkmk 



1 NCAC 1 1 A .0 4 11: 



m~ 



Title Annual Statement Blank: 1 1 NCAC 



11A .0 4 19; 

Fraternal Annual Statement Blank: — 1- 



Wr 



NCAC 11A .0 4 2 4 ; 



{&) Hospital, Medical and Dental Service or 

Indemnity Corporation Annual Statement: 
11 NCAC 11A .0 4 22; 

{&) Health Maintenance Organization Annual 



Statement Blank 



1 NCAC 1 1 A .0 4 91 



In addition, the Department will require the u s e of 
any new annual s tatement forms adopted subse 
quent to thi s date by the National A ss ociation of 
Insurance Commissioners for any other type s of 
companie s . 

Statutory Authority G.S. 57-9; 58-9(3); 58-21; 
58-134; 58-292; 57A-9; 57A-21. 



.0103 



Fef 



INSTRUCTIONS FOR COMPLETION 
OF ANNUAL STATEMENT FORMS 



-fef 



>r completion of the annual statement Torm s 
required under 11 NCAC HE .0102, the appliea 
ble instructions adopted by the National Associa 
tion of In s urance Commissioners as set forth in 
thi s Rule with it s de s ignated form number, as well 
a s all other applicable rules adopted by thi s depart 
ment, must be followed in completing and filing 
the annual statement form s : 



H^ 



md 



In s truction s — fef — completing — L+te — ar 
Accident and Health Annual Statement 
Blank: 11 NCAC HA .0 4 16; 



&- 



In s truction s — fef — completing — Fife — aftd 

Casualty Annual Statement Blank: H 

NCAC 1 1 A .0 4 12; 

0) Instructions for completing Title Annual 

Statement Blank: 11 NCAC 11A .0 4 20; 



{4j- 



Instructions — fef — completing — Fraternal 
Annual Statement Blank: 11 NCAC HA 
tQ435t 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2292 



PROPOSED RULES 



i^j Instructions — fef — completing — Ho s pital, 

Medical and Dental Service or Indemnity 
Corporation Annual Statement Blank: — 14 
NCAC 11A .0 4 23; 

f&) Instruction s — fef — Health — Maintenance 

Organization — Annual — Statement — Blank: 
1 1 NCAC 1 1 A .0 4 92. 



f- 



In addition, the Department will require the use o 
any new in s truction s adopted s ubsequent to this 
date — by the — National — Association of Insurance 
Commissioners which are applicable to any new 
annual statement blank. 



federal regulatory agency, e.g., S.E.C., I.R.S., it 
is — permissible — for a company — to submit such 
differing statements in conjunction with the sub 
mission of the statutory financial statements or 
information, together with an appropriate reconeili 
ation with the insurer's required statutory state 
ments. 



Statutory Authority G.S. 58-34.1. 

SECTION .0200 - FIRE AND CASUALTY: 
GENERAL NATURE 



Statutory Authority- G.S. 58-9(3); 57A-9; 57A-21. 

. 1 04 FORM OF QUARTERLY FINANCIAL 
STATEMENTS 



WJ 



ten — financial — statements — other than — efl — an 
annual ba s i s are required to be filed with this 
department, the quarterly financial statement forms 
adopted by the National As s ociation of Insurance 
Comm i s s ioner s for the respective type of company 
as set forth below mu s t be used to comply with 
s uch other reporting requirement s : 

<4) L i fe and Accident and Health Quarterly 

Statement Blank: 11 NCAC 11A .0 4 17; 
Fire and Casualty Quarterly Statement 
Blank: 11 NCAC IIA .0 4 1 4 ; 



m- 



T i tlc — Quarterly — Statement 
NCAC I I A .0 4 21; 



B lank 



m- 



Fraternal Quarterly 
NCAC IIA .0 4 26; 



Statement Blank: — 14 



m- 



Health Maintenance Organization Quar 
t c rly Statement Blank: 11 NCAC IIA 
.0 4 03. 



el 



In addition, the Department will require the u s e 
anv new quarterly s tatement forms adopted subsc 
quent to thi s date by the National A ss ociation of 
In s urance Commissioner s for any other type s of 
compan i e s . 

Statutory Authority G.S. 58-9(3); 57A-9; 57.A-2I. 



.0105 



APPLICABILITY OF FINANCIAL 
STATEMENTS 



Financ i al statement s or information prepared on 
a basis other than statutory accounting practices 
filed with the Commissioner shall not satisfy the 
fi l ing or reporting requirements of any law or 
ruling — requiring — s-ueh — financial — statement s — ©f 
information nor shall such differing statement s or 
information be used a s the ba s i s of a c i tation for a 
violation of any law or ruling. — Where s uch differ 
ing financ i al s tatement s or information are appro 
priatc for the requirements of anv other s tate or 



.0201 GENERAL NATURE 

The Fire and Casualty Section of the tax. audit 
and statistical operation unit contains all the rules 
applicable to that s ection. 

Statutory Authority G.S. 58-9. 

.0202 TAX ON RECEIPTS FOR PREMIUMS 

Article 1 of Chapter 1 18 of the General Statutes of 
North Carolina makes provision for the payment of 
a "Firemen's Relief Fund Tax" of one-half of one 
percent by fife insurance companies, corporations 
and associations. 

The references therein contained are interpreted 
to impose such tax on fire, lightning and automo- 
bile tire and lightning premiums and must be paid 
by any company writing such lines whether such 
companies are fire or casualty companies. 

Statutory Authority G.S. 58-2-40; 118-2. 

.0203 PREMIUM FINANCE CHARGES 

Premium finance charges are considered to be a 
part of the premium charge for premium tax 
purposes and are to be included as part of the 
gross premiums as defined in G.S. 105-228.5. 

Statutory Authority G.S. 58-2-40; 105-228.5. 

SECTION .0300 - LIFE: GENERAL 
NATURE 

.0303 PREMIUM TAXES ON ANNUITIES 

Every life insurer, — in computing its premium 
taxe s on gro ss premium s , after giving due consid 
eration to the exemption s a s s pecified in G.S. 
105 228.5. may pay premium taxes on premiums 
for the purcha s e of annuities at such time as the 
contract holder elects to commence annuity bene 
fi t.- 

(a) Rollovers of annuity contracts within the 
same insurance company are not taxable. Roll- 



2293 



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January 15, 1993 



PROPOSED RULES 



overs of annuity contracts into another insurance 
company are taxable. 

(b) Additional premiums received by an insur- 
ance company on or after January J^ 1988, for 
annuity contracts begun prior to that date are 
taxable not when received, but only when 
annuitized or withdrawn. Premium tax paid in 
prior years on these annuity contracts may be 
applied against the total premium tax due when the 
annuity contracts are either annuitized or with- 
drawn. 

(c) Premium tax is payable on premiums re- 
ceived for annuity contracts written on or after 
January J_, 1988. at the time the contract is subse- 
quently annuitized or withdrawn. 

(d) For purposes of this Rule, "withdrawn" 
means withdrawn by cash surrender, partial cash 
surrender, rollover into another insurance compa- 
ny, or death benefit, if one of these events occurs 
instead of annuitization. 

(e) Interest earned on premiums received by an 
insurance company for an annuity contract is not 
subject to the premium tax. 

(f) For annuity taxation, the legal residence of 
the contract holder at the time the annuity contract 
is purchased determines the state to which the 
annuity tax will be paid, regardless of the resi- 
dence of the contract holder at the time of 
annuitization or withdrawal. North Carolina 
considers the premium tax on an annuity to have 
attached at the time the insurance company re- 
ceives the premium. Only the payment of the tax 
is deferred until a later time. An insurance com- 
pany, therefore, must report and pay to North 
Carolina the annuity tax on an annuity purchased 
by a North Carolina contract holder at file time 
that the contract is annuitized or withdrawn, 
regardless of the contract holder's state of resi- 



m- 



& 



figures in the in s urer' s statutory state 
ments filed with the Commissioner; 
Such differing statements must have been 
prepared on a ba s i s which is in aceor 
dance with requirement s of a competent 
authority, whether or not such require 
ment s are specifically applicable to the 
individual insurer; 

Such differing s tatements must, if they 
s how an amount of surplus which differs 
from the amount of s urplus on the basis 
of the insurer' s statutory s tatements filed 



with the Commi ss ionc 



tiselosc in c 



*JH 



*4 



prominence the amount of statutory sur 
pi 



u s and any restrictions on any exc 



-ef 



the surplus according to s uch differing 
s tatement s over the surplus on the basis 
of the insurer's statutory statements filed 
with the C 



ommissio 



lence at the time of annuitization or withdrawal. 



Heft Example of 

s uch re s trictions includes statutory limita 
tion s — efl — s tockholder and — policyholder 
dividend s , s ince s uch limitations arc in 
term s of amount s of statutory surplus 
only; 

{4) A copy of s uch differing s tatements must 

be s ent to the Commis s ioner, for infor 
motion. — accompanied — m — toe — ease — ©f 
full year differing statements by a rceon 
ciliation — of figure s — in — svteb — differing 
s tatements with figures in the insurer's 
statutory statements tiled with the Com 
mi ss ioner; 

fS-) A record of the actuarial assumptions 

underlying — s«eh — differing — s tatements, 
together with documentation of the vari 
ou s item s of s uch s tatement s , mu s t be 
preserved at the insurer's home office for 
a period of at least five years following 
publication of s uch statements. 



Statutory Authority G.S. 58-2-40; 105-228.5. 



Statutory Authority G.S. 58-34.1. 



.0306 FINANCIAL REPORTING: 
DIFFERING STATEMENTS 



If a life 



a life insurer publishes financial statements 
prepared on a basis different from the basis of its 
s tatutory s tatement filed with the Insurance Com 
mi s sioner they must: 

fH Such differing statements mu s t di s clo s e 

that their basis differs from that of the 
insurer's statutory s tatement s filed with 
the Commi ss ioner and must, in the case 



ot full year differing statement s , be ac 
eompnnicd — by — a — reconciliation — of the 
figures in such differing s tatement s with 



.0307 FINANCIAL REPORTING: FORM OF 
RECONCILIATIONS 



The — form — ©f- 



w — Torm — ef — reconciliations — required — bv — 14 
NCAC HE .0306(1) and .0306( 4 ) should be 



generally in the form s designated as 1 1 — NCAC 
1 1 A .0 4 86 and 1 1 A .0 4 87 which may be expanded 
to s how additional significant detail. 

Statutory Authority G.S. 58-34.1. 

.0308 FLNANCIAL REPORTING: 
DEFINITIONS 

The term "statutory statements", as used in the 



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January 15, 1993 



2294 



PROPOSED RULES 



rules on financial — reporting. — refer s to financial 
s tatement s prepared in a manner consistent with 
the manner approved by the National Association 
of Insurance Commis s ioner s for purposes of the 
annual statement and required by the Insurance 
Commissioner. 

The term "competent authority" a s u s ed in the 
rules on financial reporting shall include, but not 
be limited to. the Securities and Exchange Com 
mi ss ion, the blue sky commission of any state or 
other political — body, and any public — s ecuritie s 
exchange. 



Statutory Authority G.S. 58-34. 1. 

.0309 FINANCIAL REPORTING: 
DIFFERING STATEMENTS 

If the in s urer publ is hes financial information not 
based on s tatutory accounting princip l e s : 

f-h such information must (unless a change 

in accounting practice or policy has been 
adopted in the current year. — in which 
ca s e the change mu s t al s o be di s clo s ed) 
be consistent with figure s in complete 
s tatements covering a full vear no earlier 



fe 



an for insurer's l ate s t completed fiscal 
year, which has been prepared and sent 
to the Insurance Commi ss ioner in aecor 
dance — with the requirements of these 
rules and 

(3) if s uch information includes the in s ur e r' s 

s urplu s according to such differing state 



lent s . it mu s t d ir- 



with equal 



pro mi 

nence the in s urer' s s urplus on the basis 
of the insurer's statutory statement filed 
with the Commissioner and must indicate 
am 1 restriction s on the exce ss (if any) of 
the former over the latter. 
Example s of s uch re s trictions — include s tatutory 
limitations on stockholder and policyholder divi 



dend s . 



limitation s — are — m — terms — o 



amounts of statutory surplu s only. 



Statutory Authority G.S. 58-34.1. 



\ 



or more life insurers' figures are included in the 
information publi s hed by the parent or affiliate 
company, s uch reconciliation may be prepared on 
the ba s is of all such insurer s ' figures combined. 

Statutory Authority G.S. 58-34.1. 

SECTION .0400 - MISCELLANEOUS: 
GENERAL NATURE 

.0402 EXTENSION OF FILLNG DATE 



Thr 



ie annual report of a ho s pital, medical and 
dental s ervice corporation and health maintenanc e 
organizations is due on or before the first day of 
March of each year; however, the Commissioner 
may. for good and s ufficient cause shown by a 
company, extend the filing date of such annual 
s tatement for s uch — company. — for a reasonable 
period of time, not to exceed 30 days. 



Statutory Authority G.S. 57-9; 57A-9; 57A-21 ; 
58-21. 

.0403 RENEWAL CERTIFICATE OF 
AUTHORITY: HMO 

The renewal licen s e application form for health 
maintenanc e — organizations shall — be filed on or 



before March — 1- 



«te- 



)re Marcn — I each year and in the form 
scribed in 11 NCAC 1 1 A .0 4 00. Such certifica 



wlu 



jd by the Commi 



ii hall be 



tion when i ss ued ny tne Commissioner shal 
effective July 1 each year. — Renewal of the C e rtifi 
cat e of Authority for health maintenance organiza 
tion s s hall be i s sued by the Commi ss ioner and at 
hi s di s cretion after s ati s factory completion of the 
following matters: 

f-H Timely payment of the application fee a s 

prescribed in G.S. 57A 20: 

{3) Timely compliance with all other require 

ment s a s contained in G.S. 57 A: and 

<-^-) Timely pre s entation to the commi s sioner 

by — ihe — applicant — of evidence — that — ttte 
applicant — has — reasonable — potential — f-er- 
successful operation of a health mninte 
nance organization. 



.0310 FINANCIAL REPORTING: PARENT 
OR AFFILIATED INSURERS 

If a life insurer's differing figure s are included in 
financial statement s or other financial information 
publi s hed by a parent or affiliate of the in s urer, the 
in s urer shall send to the Commi ss ioner a copy of 
#hs — published — information accompanied — bv — awv 
reconciliation which it would have been required 
to send to the Commi ss ioner if it hav e publi s hed 
s imilar information on its own. except that if two 



Statutory Authority G.S. 57A-20; 58-9. 

.0404 FILLNG ANNUAL STATEMENTS FOR 
HMO'S 

The annual statement form for health 
nance organization s a s described in 



mainte 
NCAC 1 1 A 



A±m 



s hall he fi l ed on or before March I e ach 
year for the preceding calendar year. — The annual 
statement shall contain, along with other required 
information. — an — actuarial — certification — from — a 



2295 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



recognized authority a s to the adequacy of the 
reserves a s required under G.S. 57A 6. — Such 
certification must certify that the rates as currently 
charged by the applicant are neither excessive, 
inadequate nor unfairly discriminatory as set forth 
in G.S. 57A 8(b)(2). 

Statutory Authority G.S. 57A-6, -8(b)(2), -9. 



.0405 



INDEPENDENT CERTIFIED PUBLIC 
ACCOUNTANT AUDITS: HMO 



Each applicant for a renewal license as a health 
maintenance organization in thi s s tate s hall file on 
or before May 1 of each year with the Commi s 
sioner an audit report and management — letter. 
Such audit report and management letter s hall be 
compiled — by — the — independent — certified — public 
accountant audit of the health ma i ntenance organi 
zation. — The independent certified public accoun 
tant audit shall contain, along with other pertinent 
information. — general — operation s — of the — health 
maintenance organization and condition and affair s 
of the health — maintenance organization for the 
preceding calendar year or fi s ca l — year with — a 
calendar year update. 



Statutory Authority G.S. 57A-3(c)(8). 

SUBCHAPTER 11F - ACTUARIAL 

.0002 RESERVES ON CREDIT LIFE 
INSURANCE 

fa-) — All credit life policie s i ss ued on or after the 
operative date of this Rule shall maintain reserve s 
computed in accordance with the Commissioner's 
1058 Extended Term — Mortality Table at three 
percent. 

fb) — The method of formulating reserves and 
amount s of reserve s and other liabilities established 
by any in s urance company for payment of claims 
under credit — h-fe — insurance — policie s — s hall — be — m 
every ca s e s ubject to examination and reviews of 
the Commi ss ioner of Insurance. 

Statutory- Authority G.S. 58-9(1 ); 58-143. 



.0003 



Any 



RESERVES ON CREDIT ACCIDENT 
AND HEALTH INSURANCE 



in s urance company writing credit accident 
and health insurance shall maintain as minimum 



nd 



actuarial reserves prudent and actuarially s ou 
reserves ba s ed upon current actuarial practices 



T-h* 



lethod s — of formulating — rcservi 



-ftftd — the 

amounts of reserve s and other liabilitie s e s tablished 
by any insurance company for the payment of 



claims under credit accident and health in s urance 
policie s s hall be in every case subject to examina 
tion and review of the Commissioner of Insurance. 

Statutory Authority G.S. 58-9(1); 58-143. 

.0004 AUDIT TRAILS ON RESERVES 
REQUIRED 



shall be 



jd to 



hvery in s urance company snail Be requirec 
maintain adequate re s erve records in such a mail ' 
ner that an audit trail can easily be e s tablished and 
determined both in summary and detail form. 
In s urance in force by each mortality and interest 
valuation method shall be available. 



Statutory Authority G.S. 58-9(1). 

.0006 RESERVES FOR PRESENT VALUE 
OF FUTURE BENEFITS REQUIRED 

Re s erve s for the present value of future benefits 
on accident and h e alth policie s under which eont i n 

jvent of 



uou s payment s are to be made in the 
di s ability s hall be e s tabli s hed by the company and 
the minimum ba s i s of valuation for such present 
value of future benefits shall be the 1 06 4 Commis 
s ioner s Di s ability Table at three percent or any 
other method — which — may — be approved — by — the 
Commi s sioner of Insurance. 



Statutory Authority G.S. 58-9. 

.0007 PURPOSE 

The purpose of this Rule i s to recognize new 
mortality table s . 10 8 3 Table "a" and 19 8 3 GAM 
Table, for u s e in determining the minimum s tan 
dard of valuation for annuity and pure endowment 
contracts. 

Statutory Authority G.S. 58-9: 58-201. 1. 

.0008 DEFINITIONS 

(a) As used in this Rule "1083 Table "a"" means 
that mortality table developed by the Society of 
Actuarie s Committee to Recommend a New Mor 
tality Basis for Individual Annuity Valuation and 
adopted as a recognized mortality table for annu 
ities in June 1082 by the National A ss ociation of 
In s urance Commissioners. 

(b) As u s ed in thi s Rule "1983 GAM Table" 
mean s that mortality table deve l oped by the Soci 
ety of Actuaries — Committee on — Annuities and 
adopted a s a recognized mortality table for annu 
ities in December 1083 by the National As s oeia 
tion of Insurance Commi ss ioner s . 



7:20 



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January 15, 1993 



2296 



PROPOSED RULES 



Statutory Authority G.S. 58-9; 58-201. 1. 

.0009 INDIVIDUAL ANNUITY OR PURE 
ENDOWMENT CONTRACTS 



The 1 083 Table "a" 



recognized and 



approved as an individual annuity mortality table 
for valuation and. at the option of the company, 
may be u s ed for purpo s e s of determining the 
minimum standard of valuation for any individual 
annuity or pure endowment contract i ss ued on or 
after April 19, 1979, 
(b) The 1083 Table 



to be 



ad for deter 



mining the minimum standard of valuation for any 
ind i vidual annuity or pure endowment contract 
issued on or after January 1. 1087. 



Statutory Authority G.S. 58-9: 58-201. 1. 

.0010 GROUP ANNUITY OR PURE 
ENDOWMENT CONTRACTS 

(a) The 1083 GAM Table and the 1983 Table 
"a" are recognized and approved a s group annuity 
mortality tables for valuation and. at the option of 
the company, either table may be used for purpos 
es of valuation for any annuity or pure endowment 
purcha s ed on or after April — H^ — 1070 under a 
group annuity or pure endowment contract. 

<b) — The 19 8 3 GAM Table is to be used for 
determining the minimum s tandard of valuation for 
any annuity or pure endowment purchased on or 
after January I . — 1987 under a group annuity or 
pure endowment contract. 



Statutory Authority G.S. 58-9; 58-201. 1. 

SUBCHAPTER 11H - CONTINUING CARE 

FACILITIES 

.0001 DEFINITIONS 

(a) As used in this Section, unless the context 
clearly indicates otherwise: 

also means 



Lb 



L^J 



"Health related services" 
domiciliary (rest home) care or Homes 
for the Aged, skilled or intermediate 
nursing, nursing home or rest home 
admission, or priority admission into a 
facility, unit, or bed providing any of 
the above-named services. 
"Insolvent" means a financial condition 



whereby a provider or facility whose 
admitted assets do not exceed its liabili- 
ties plus any equity levels or reserve 
levels as required by Article 64 or by 
other laws or by standardized account- 
ing procedures or whose working capi- 



13] 



tal is not sufficient to pay its obligations 
as they become due. 
"Lodging" means independent living 
without the need or use of health relat- 
ed services. 



(b) The definitions contained in G.S. 58-64-1 
are incorporated into this Section by reference. 

Statutory Authority G.S. 58-2-40: 58-64-1; 
58-64-65. 

.0002 LICENSE - STEPS 

Continuing Care facilities must apply for licen- 
sure in accordance with the following steps: 
( 1 ) For new or development stage facilities: 
(a) The provider must initially submit the 
following items to the Commissioner 
for review and approval: 
(i) The provider/sponsor names, address- 
es, and telephone numbers; 
(ii) A copv of a Non-Rinding Reservation 

Agreement form (N'BRA); 
(iii) Escrow agreement: 
(iv) Narrative describing the facility, its 
mode of operation, and its location: 
Any advertising materials to be used; 
and 



£yjj 



Any additional materials/information 
or ongoing periodic reporting as 
required by the Commissioner, 
(b) Upon completion of step 1(a). the 
provider may: 

Oil Disseminate materials describing the 
intent to develop a Continuing Care 
facility; and 

(ii) Enter into f u 1 1 y refundable 
Non-Binding Reservation Agreements 
(N'BRA's) for up to one thousand 
dollars ($1.000.00). AH funds re^ 
ceived must be escrowed. 



Ql Start-Up Certificate: 
(a) in order to obtain a Start-Up Certifi- 
cate, the provider must submit the 
following to the Commissioner for 
review and approval: 

Application for Licensure, as required 

by G.S. 58-64-5(b): 

A Disclosure Statement, as required 

by G.S. 58-64-20: 

A copy of a binding Reservation 



ii) 

m 

(iii) 

iixi 

(V) 



Agreement or Resident Agreement: 
A market feasibility study: and 
Any additional materials/information 
or ongoing periodic reporting as 
required by the Commissioner. 



2297 



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January 15, 1993 



PROPOSED RULES 



(b) Upon issuance of the Start-Up Certifi- 
cate, the provider may: 
(i) Enter into binding Reservation Agree- 
ments or Resident Agreements: 
(ii) Begin site preparation work; and 
(iii) Construct model units for marketing. 

(3) Preliminary Certificate: 

(a) In order to obtain a Preliminary Certifi- 
cate, the provider must submit the 
following to file Commissioner for 
review and approval: 

ii) An explanation of any significant 
differences between actual costs and 
projected costs contained in the 
Start-Up Certificate submission (not 
required for existing operational 
Continuing Care facilities that are 
expanding): 

(ii) An updated Disclosure Statement; 

(iii) Current interim financial statements; 

(iv) Confirmation of signed agreements 
for at least 50 percent of the new 
units, reserved by a deposit equal to 
at least 10 percent of the entrance fee 
or by a no n- re fundable deposit equal 
to the periodic fee for at least two 
months for facilities that have no 
entrance fee; and 

(v) Any additional materials/information 
or ongoing periodic reporting as 
required by the Commissioner. 

(b) Upon issuance of the Preliminary Cer- 
tificate, the provider may: 

(i) Purchase or construct a Continuing 
Care facility; 

(ii) Renovate or develop structure(s) not 
already licensed as a Continuing Care 
facility; and 

(iii) Expand existing Continuing Care 
facilities in excess of JO percent of 
the current number of available Inde- 
pendent Living I nits (ILl's) and/or 
available health related units/beds. 

(4) Permanent License: 

(a) In order to obtain a Permanent License. 

the provider must submit the following 

to the Commissioner for review and 

approval at least 60 days before the 

facility opening: 

(D An updated Application for Licensure: 

(ii) An updated Disclosure Statement; and 

(iii) Confirmation of signed agreements 

for at least 80 percent of the new 

units, reserved by a deposit equal to 

at least 10 percent of the entrance fee 



or by a non-refundable deposit equal 
to the periodic fee for at least two 
months for facilities that have no 
entrance fee, 
(b) Upon issuance of the Permanent Li- 
cense, the provider can, presuming all 
other legal requirements have been met 
or completed: 
li) Open the Continuing Care facility; 

and 
(ii) Provide Continuing Care. 



(5) 



Restricted or Conditional License: 



Where applicable, the Commissioner 
may provide facilities exhibiting specif- 
ic conditions, criteria, or hazardous 
financial conditions, with a Restricted 
or Conditional License. Reporting 
data, format, schedules, routines, re- 
strictions, and conditions shall be deter- 



ib) 



mined by the Commissioner, and are 
subject to change by the Commissioner. 
Upon issuance of the Restricted or 
Conditional License, the provider may 
continue to operate the facility under 
the conditions or restrictions as deter- 
mined by the Commissioner until such 
time as flie Commissioner alters the 
conditions acceptable for continued 
operations, issues a Permanent License. 
or takes whatever other action is appro- 
priate. 



Statutory Authority G.S. 58-2-40; 58-64-5; 
58-64-65. 

.0003 REVOCATION OF LICENSE 

The revocation process, as provided by G.S. 
58-64-10, shall also apply to the Start-Up Certifi- 
cate, the Preliminary Certificate, and the Restrict- 
ed or Conditional License. 

Statutory Authority G.S. 58-2-40; 58-64-10; 
58-64-65. 

.0004 SALE OR TRANSFER OF 
OWNERSHIP 

The sale or transfer process, as provided by G.S. 
58-64-15. shall also apply to the Start-Up Certifi- 
cate, the Preliminary Certificate, and the Restriet- 
ed or Conditional License. 



Statutory Authority G.S. 58-2-40; 58-64-15; 
58-64-65. 

.0005 STANDARDIZED DISCLOSURE 



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NORTH CAROLINA REGISTER 



January 15, 1993 



2298 



PROPOSED RULES 



STATEMENT FORMAT 

As per G.S. 58-64-20(di. the Commissioner may 
prescribe a standardized format for the Disclosure 
Statement. The format shall be maintained by the 
Commissioner, and may be updated as necessary. 



Statutory Authority 

5S-64-65. 



G. S. 58-2-40; 58-64-20; 



.0006 HEALTH AND FINANCIAL 

CONDITIONS FOR ACCEPTANCE 

The health and financial conditions for accep- 
tance as a resident shall appear within the Disclo- 
sure Statement. as provided by G.S. 



58-64-20(a)(8). The Disclosure Statement shall 
also include any conditions related to the accep- 
tance conditions required by the provider or 
facility, such as age, ability to move or communi- 
cate, minimum assistance levels necessary- to 
perform daily activities, prepared wills, and ability 
to pay under specified conditions. 



Statutory Authority 

58-64-65. 



G.S. 58-2-40; 58-64-20; 



.0007 FINANCIAL STATEMENTS AND 

COMPILED FIVE YEAR FORECASTS 

Certified financial statements, as required by 
G.S. 58-64-20(a)(10). and compiled five year 
forecasts, as required by G.S. 58-64-20(a)( .12). 
shall be of the provider's corporation or other 
legal entity that owns the Continuing Care facility. 
The Commissioner may also require the provider 
to supply supplementary financial data or other 
appropriate disclosure under the requirements of 
G.S. 5S-64-20(a)(10) and G.S. 58-64-20(a)( 12) on 
individual Continuing Care facilities, where a 
corporation or other legal entity owns various 
Continuing Care facilities or is engaged in various 
enteiprises. 

Statutory Authority G.S. 58-2-40; 58-64-20; 
58-64-65. 

.0008 COMPILED FIVE YEAR FORECAST 

(a) The compiled five year forecast shall consist 
of the following: 



ill 
ill 
£31 
£41 



a balance sheet: 



a statement of operations: 
a statement of cash flows: and 
a narrative detailing all significant 
assumptions. 
i bi The balance sheet shall include individual 

categories or line items that sum into the following 

sub-totals, at a minimum: 



iii 
£21 

£3) 

£41 

ill 

£61 

ill 
ill 

£91 

(10) 

(11) 

£cl The 

following 
minimum: 

iii 

£21 

iii 

iii 

ill 

£61 

ill 



£81 

£91 
(10) 

(11) 



current assets: 



restricted assets, including a line item 

for operating reserve assets: 

fixed assets, including property, plant. 

and equipment: 

total assets: 

current liabilities: 



long-term debt; 



total liabilities; 



deferred revenue-refundable; 
deferred revenue-nonrefundable: 
equity or fund balance-unrestricted; and 
equity or fund balance-restricted, 
statement of operations shall include the 
individual categories or line items, at a 

monthly fee revenues: 
amortization of entrance fees: 



health care revenues: 
investment/interest income; 
contributions/gifts; 
health care expenses; 
operations expenses, consisting of at 
least maintenance, laundry', and house- 
keeping: 

dietary expenses: 
administrative expenses; 
interest expenses; and 
depreciation. 



Statutory Authority 
58-64-65. 



G.S. 58-2-40; 58-64-20; 



.0009 PROPOSED OR DEVELOPMENT 
STAGE FACILITIES 

The Commissioner may apply all or part of G.S. 
58-64-20(a)( 14) to existing Continuing Care 
facilities that are expanding. 

Statutory Authority G.S. 58-2-40; 58-64-20; 
58-64-65. 

.0010 CONTRACT SPECIFICATION - 
LIVING UNIT 

A "living unit." as described in G.S. 
58-64-25(a)(2). means an independent living unit 
or a health care unit/bed, or as otherwise defined 
b\ the annual North Carolina State Medical Facili- 



ties Plan. 

Statutory Authority G.S. 58-2-40: 58-64-25; 
58-64-65. 

.0011 DISCLOSURE STATEMENT 
REVISIONS 



2299 



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XORTH CAROLIXA REGISTER 



January 15, 1993 



PROPOSED RULES 



Any provider that revises its Disclosure State- 
ment at any time other than its annual revision [n 
order to prevent a material misstatement of fact or 
due to omitting a material fact, as provided by 
G.S. 58-64-30, must submit the revised Disclosure 
Statement for the Commissioner's approval before 
distribution. 

Statutory Authority G.S. 58-2-40; 58-64-30; 
58-64-65. 

.0012 OPERATING RESERVES 

Operating reserves may be funded by investment 
grade securities, including: cash, invested cash, 
bonds, stocks. U.S. Treasury obligations. U.S. 
Government agencies, or by an unconditional, 
irrevocable letter of credit of a quality satisfactory 
to the Commissioner. Operating reserves shall be 
funded and the use of the corresponding assets 
shall be restricted solely for these puiposes. The 
Commissioner may otherwise require facilities to 
independently escrow such reserve assets. 

Statutory Authority G.S. 58-2-40; 58-64-33; 
58-64-65. 

IS otice is hereby given in accordance with G.S. 
150B-21.2 that the N. C. Department of Insurance 
intends to adopt rules cited as 11 NCAC 12 . 1301 
- . 1309. 

1 he proposed effective date of this action is April 
1. 1993. 

1 he public hearing will be conducted at 10:00 
a.m. on February 8. 1993 at the Dobbs Building, 
3rd Floor Hearing Room, 430 N. Salisbury Street, 
Raleigh, N.C. 27611. 

jtveason for Proposed Action: To provide for 
interpretative and substantive rules in the imple- 
mentation of the Small Employer Group Health 
Insurance Reform Act. 

tsomment Procedures: Written comments may be 
sent to Rodney Finger, P.O. Box 26387, Raleigh, 
N.C. 27611. Oral presentations may be made at 
the public hearing. Anyone having questions 
should call Rodney Finger at (919) 733-5060 or 
Ellen Sprenkel at (919) 733-4529. 



tLditor's Note: Tliese Rules were filed as tempo- 
rary adoptions effective December 21, 1992 for a 
period of 180 days or until the permanent rule 
becomes effective, whichever is sooner. 

CHAPTER 12 - LIFE AND HEALTH 

SECTION .1300 - SMALL EMPLOYER 
GROUP HEALTH COVERAGE 

.1301 DEFINITIONS 

(a) As used in this Section, unless the context 
clearly indicates otherwise: 



ill 
13] 



14] 



£5) 



16] 



ill 



18] 



19] 



(10) 



"Act" means the North Carolina Small 

Employer Group Health Coverage 

Reform Act described in G.S. 

58-50-100. 

"Carrier" means a small employer 

carrier. 

"Extra eligible" means an individual 



who is not an eligible employee or a 
dependent of an eligible employee who 
is insured under the health benefit plan 
of a small employer. 
"New entrant" means an eligible em- 
ployee, or the dependent of an eligible 
employee, who becomes part of an 
employer group after the initial period 
for enrollment in a health benefit plan. 
"Nonstatutory plan" means any health 
benefit plan subject to the Act other 
than the statutory plans. 
"Policy anniversary" or "plan anniver- 
sary" means the annual anniversary of 
the issuance of a health benefit plan. If 
a plan is issued through a multiple 
employer trust, "policy anniversary" or 
"plan anniversary" means the annual 
anniversary of the issuance of the health 
benefit plan to the small employer. 
"Previously declined group" means a 
group whose application for coverage 
was declined for any reason by a carri- 
er after January f^ 1992, and before 
August 14, 1992. 

"Previously declined individual" means 
an individual whose application for 
coverage for a health benefit plan was 



declined by a carrier before August 14. 
1 9<-J2 . 

"Producer" means an insurance agent or 
insurance broker licensed under Article 



33 of G.S. Chapter 58. 

"Statutory plan" means the basic or 



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January 15, 1993 



2300 



PROPOSED RULES 



standard health care plan, 
(b) The definitions contained in G.S. 58-50-1 10 
are incorporated into this Section by reference. 

Statutory Authority G.S. 58-2-40(1). 

.1302 SCOPE 

(a) Any health benefit plan is subject to the Act 
if it is a health benefit plan under G.S. 
58-50-1 15(a)(1) or £2) and is not excluded from 
the Act by G.S. 58-50-110(11). 

(b) This Section does not apply to individual 
health insurance policies that are not subject to 
G.S. 58-50-115. 

(c) The Act and this Section apply to a health 
benefit plan provided to a small employer or to the 
employees of a small employer without regard to 
whether the health benefit plan is offered under or 
provided through a group policy or trust arrange- 
ment. 

Statutory Authority G.S. 58-2-40(1); 58-50-1 10(5); 

58-50-1 13(h)(3); 58-50-1 15. 

.1303 POLICY FORMS AND APPROVALS 

All carriers must file all health benefit plan 
policy forms with the Department for approval 
before they may be used. The following proce- 
dures apply to filing those policy forms: 

( 1 ) The filing cover letter shall include a 
certification by the carrier that specifies 
that the health benefit plan will be mar- 
keted to small employers. Each health 
benefit plan that will be marketed with 
payroll deduction shall include this eertif- 
ication. 

(2) Carriers are not required to file new 
health benefit plan policy forms. Exist- 
ing policy forms may be brought into 
compliance with the Act by means of 
amendments or variable language. 

Statutory Authority G.S. 58-2-40(1 ); 58-50-1 25(h); 
58-51-1. 

.1304 COIVEPLIANCE 

(a) Each carrier and third party administrator 
shall file a report on North Carolina small employ- 
er group insurance activity annually on or before 
March 15. which report shall describe case charac- 
teristics and numbers of health benefit plans in 
various categories marketed or issued to small 
employers. The report shall be in a format pre- 
scribed by the Commissioner. 

(b) On and after August 14. 1992. each carrier 



shall offer both statutory plans to any small em- 
ployer whose application for coverage the carrier 
refused if the refusal occurred on or after January' 
K 1992. but before August 14. 1992. This offer 
may be made at the anniversary of the declination, 
but not later than August 13. 1993. 

(c) A carrier that offers coverage to a small 
employer shall offer coverage to each eligible 
employee and to each eligible dependent. The 
carrier shall provide the same health benefit plan 
to those employees and dependents. 

(d) A carrier shall not set contribution and 
participation requirements for the statutory plans 
that are more restrictive than those for the carrier's 
nonstatutory plans. 

(e) In applying minimum participation require- 
ments for a small employer and in determining 
whether the applicable percentage of participation 
is met, a carrier shall not consider employees or 
dependents who have existing coverage, whether 
the coverage is through another employer-based 
health benefit plan, an individual health insurance 
policy. Medicare, or Medicaid. 

(f) Each carrier shall offer both statutory plans 
to any small employer upon request or if the 
carrier is unable to issue a nonstatutory plan to the 
small employer applicant. 

(g) A carrier shall provide an extension of 
benefits to any insured who is a hospital inpatient 
until the insured js released by the hospital if the 
insured's existing coverage would end during the 
insured's hospital stay and if replacement coverage 
is not available to the insured, subject to the 
continued payment of monthly premiums or dues 
by the insured. 

(h) New business applications submitted to a 
carrier on and after September J_, 1992. shall be 
accompanied by a statement signed by the produc- 
er and the small employer applicant that certifies 
that the employer understands that the firm may 
elect coverage under the statutory plans. The 
disclosure form shall be made part of such state- 
ment. A copy of the signed statement and disclo- 
sure form must be provided to the small employer 
applicant. The disclosure form shall be in a form 
prescribed by the Commissioner. 

£i) If a carrier establishes more than one class of 
business under G.S. 58-50-1 13. the carrier shall 
maintain at least one basic and standard health care 
plan in each class of business so established. 
Nothing in this Section prevents a carrier from 
offering the statutory' plans through an association 
or multiple employer trust. 

Statutory Authority G.S. 58-2-40(1); 58-50-105: 



2301 



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PROPOSED RULES 



58-50-113; 58-50-1 20(c)(4); 58-50-1 20(c)(6); 
58-50-125(d); 58-50-1 30(a)(2); 58-50-1 30(a)(5); 
58-50-1 30(d); 58-50-1 30(f). 

.1305 PROHIBITED ACTS 

(a) A carrier shall not unilaterally change a 
small employer group from one health benefit plan 
to another. A carrier shall not require an in-force 
health benefit plan risk to replace existing cover- 
age with the basic or standard health care plans. 

(b) No carrier, its agents or field representa- 
tives, a broker, nor a small employer shall dis- 
courage any employee or dependent from applying 
for coverage so that the small employer can be 
issued a more favorable premium rate or benefit 
package. 

(c) No carrier shall set classes of employees in 
such a way as to exclude any employees who are 
eligible for insurance by definition. This Para- 
graph does not prevent a carrier from classifying 
ineligible employees or "extra-eligibles". 

Statutory Authority G.S. 58-2-40(1 ); 58-50-1 25(d); 
58-50-1 30(a)(3). 

.1306 REINSURANCE POOL 

(a) Conditions and procedures regarding partici- 
pation in and administration of the Pool shall be 
promulgated by the Board. 

(b) Reinsurance |s available for coverage of 
eligible employees, their dependents, or the entire 
small employer group under any health benefit 
plan issued as new business by a reinsuring carrier 
to an eligible small employer on and after August 
14, 1992. Reinsurance js also available to eligible 
small employers who were refused coverage 
between January l_j 1992 and August 13, 1992. 
and were subsequently issued a statutory plan. 

(c) Subject to any other restrictions of this 
Section, a reinsuring carrier may reinsure an 
eligible employee, an eligible employee's depen- 
dent, or a small employer group who has insurance 
coverage under any health benefit plan subject to 
the Act. 

(d) Reinsurance js available for coverage of a 
late enrollee as of the effective date of his or her 
coverage, subject to any other restrictions of this 
Section. 

(e) No carrier or producer shall disclose to 
insureds that their coverage [s reinsured by the 
Pool. 

(f) A reinsuring carrier shall apply for reinsur- 
ance within 60 days after the effective date of 
coverage. A reinsuring carrier's decision to 
reinsure a risk shall be based on the review of 



underwriting taken at the time of application. The 
decision may not be based on the small employer 
group's claims that have accrued since the effec- 
tive date of coverage. 

(g) Reinsurance coverage may remain fn effect. 
In the reinsuring carrier's and the Pool's discre- 
tion, as long as fjie reinsured coverage remains jn 
effect. When the reinsured coverage terminates, 
reinsurance will be terminated. 

(h) A reinsuring carrier may terminate reinsur- 
ance on an individual or a group without terminat- 
ing the reinsured coverage; and that reinsuring 
carrier shall not thereafter apply for reinsurance 
for the person or persons covered. 

(i) A reinsuring carrier may reinsure a 
previously-declined individual upon enrollment in 
a health benefit plan or within 60 days after that 
enrollment, subject to any restrictions of this 
Section. 



{]} Any reinsuring carrier whose health benefit 
Ian also covers extra eligibles may not reinsure 



the coverage of those extra eligibles. 

(k) Any new entrant in a health benefit plan may 
be reinsured on the effective date of his or her 
coverage but no later than 60 days after that date, 
subject to any other restrictions of this Section. 



Statutory Authority G.S. 58-2-40(1); 
58-50-1 30(h)(4); 58-50-150(a); 58-50-1 50(f)(5); 
58-50-1 50(g). 

.1307 GUARANTEED ISSUE AND 
RENEWAL 

(a) No carrier shall decline an application for 
coverage under the statutory plans. A carrier may 
continue to issue health benefit plans other than the 
statutory plans. 

(b) If an eligible employee commits fraud or 
makes material misrepresentation to a carrier, the 
carrier may rescind coverage for that employee. 
If the small employer commits fraud or makes a 
material misrepresentation to a carrier, the carrier 
may rescind coverage for that entire small employ- 
er group. 

(c) The late enrollee provision in G.S. 
58-50- 130(a)(4) applies to aff health benefit plans 
subject to the Act. 

(d) Any health benefit plan covering an employ- 
er that by definition becomes a small employer is 
not subject to the Act until the next anniversary 
date of that plan. 

(e) Any health benefit plan covering a small 
employer that by definition loses its status as a 
small employer is subject to the Act until the next 
anniversary date of that plan. At that time, the 



7:20 



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January 15, 1993 



2302 



PROPOSED RULES 



carrier shall determine if the employer is by 
definition a small employer. If the employer is not 
a small employer, the carrier may terminate the 
plan. If the carrier does not terminate the plan, 
the carrier shall amend the plan with riders or 
endorsements to comply with requirements of 
statutes and rules that were not reflected in the 
plan before the anniversary date. 

(f) Before a plan anniversary date, a small 
employer may request that coverage be changed 
from one statutory' plan to another statutory plan. 

(g) All health benefit plans subject to the Act 
that are delivered, issued for delivery, renewed, or 
continued in this State or covering persons residing 
m this State on and after August 14. 1992. must 
provide coverage for all eligible employees and 
their dependents who are willing and able to 
participate regardless of their health and without 
exclusionary riders or modifications of coverage of 
any kind. Carriers are not required to issue other 
health benefit plans subject to the Act upon re- 
quest: but if such plans are issued, a carrier must 
issue coverage to all eligible employees and their 
dependents who are willing and able to participate, 
without exclusionary riders or modifications of 
coverage of any kind. 

(h) Previously declined individuals shall be 
provided open enrollment periods in which they 
may enroll in the health benefit plan in force for 
the small employer group. This enrollment period 
shall be no less than 30 days and shall begin no 
later than the first plan anniversary date that falls 
on or after August 14. 1992. If a small employer 
chooses not to renew an existing health benefit 
plan on or after August 14. 1992. any subsequent 
carrier shall provide the open enrollment period 
for previously declined individuals. 

i. i ) Previously declined individuals are not late 
enrollees unless they fail to enroll during their 
initial enrollment periods. 

(j) On the next health benefit plan anniversary 
date that falls on or after August 14. 1992. a 
carrier shall remove all exclusionary riders or 
conditional modifications on any health benefit 
plan that is subject to the Act. 

(k) A carrier may base termination on nonpay- 
ment of premium: and shall apply termination 
decisions uniformly to all of the carrier's small 
employer group business. 

(Jj A carrier is not required to issue a statutory 
plan to a small employer if within the prior 12 
months the carrier terminated a health benefit plan 
of the small employer because the employer: 

( 1) failed to pay the premium: 

(2) committed fraud or materially misrepre- 



sented information necessary' to deter- 
mine the group size, group participation 
rate, or ffie group premium rate: or 
(3) failed to materially comply with a 
health benefit plan provision, including 
carrier requirements for employee 
group premium contributions, 
(m) All health benefit plans subject to the Act 
that were delivered, issued for delivery', renewed. 
or continued in this State or covering persons 
residing in this State on or after January' _L 1992. 
must be guaranteed renewable, except for the 
reasons listed in G.S. 58-50- 130(a)(3). 

(n) Each carrier shall provide an open enroll- 
ment period for a new entrant to be added to the 
health benefit plan. The open enrollment period 
shall be at least 30 days in length. A new entrant 
who is a new eligible employee shall be added to 
the plan within 90 days of his or her employment. 
A new entrant who is a dependent shall have an 
open enrollment period of at least 30 days, begin- 
ning on the date he or she becomes a dependent of 
an eligible employee, if the eligible employee has 
coverage. If a new entrant does not apply for 
coverage by the end of the open enrollment period- 
he or she is a late enrollee unless he or she meets 
the requirements of G.S. 58-50-1 10(1 4 la. korc. 

Statutory Authority G.S. 58-2-40(1); 58-50-105; 
58-50-125(J); 58-50-125(e)(l); 58-50-1 30(a); 

58-50-130(h). 

.1308 ELECTIONS BY CARRIERS 

(a) If an election to be a risk assuming carrier is 
disapproved by the Commissioner, the carrier shall 
be considered a reinsuring carrier as of the date of 
the disapproval, unless the carrier is already so 
considered. 

(bi An insurer that has previously notified the 
Commissioner that h. is not a small employer 
carrier may enter the small employer group health 
insurance market upon notification to the Commis- 
sioner and the Commissioner's approval of the 
carrier's statutory health benefit plans: and that 
carrier shall be a reinsuring carrier. 

Statutory Authority- G.S. 58-2-40(1 ); 58-50-1 35(a); 
58-50-135(c); 58-50-1 50(a). 

.1309 FAIR MARKETING STANDARDS 

(a) A carrier may select those agents with whom 
k chooses to contract. If a carrier chooses to 
contract with an agent, the carrier may not termi- 
nate or refuse to renew the agency contract for any 
reason related to the health status, claims experi- 



2303 



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January 15, 1993 



PROPOSED RULES 



ence. occupation, or geographic location of the 
small employer groups placed by the agent with 
the carrier. If the agent js directing statutory plan 
business to the carrier, the carrier may terminate 
the agency contract with the Commissioner's prior 
approval. 

(b) No carrier shall, directly or indirectly, enter 
into any contract, agreement, or arrangement with 
an agent that provides for or results jn any consid- 
eration provided to an agent for the issuance or 
renewal of a health benefit plan to vary on account 
of the health status, claims experience, industry, 
occupation, or geographic location of a small 
employer group covered by the plan. 

(c) Each carrier shall provide all small employ- 
ers in the same class of business an equal opportu- 
nity to obtain coverage under the statutory plans. 

(d) No carrier shall apply more stringent appli- 
cation or informational requirements for enroll- 
ment for the statutory plans than are applied for 
other health benefit plans offered by the carrier. 

(e) No carrier shall limit or discourage any 
producer marketing the statutory plans. 

(f) A carrier shall provide a price quote to a 
small employer, directly or through an authorized 
producer, within seven business days after receiv- 
ing a request for a quote and such information 
n ecessary to provide tha t quote. If additional 
information js necessary for the quote, a carrier 
shall notify a small employer, directly or through 
an authorized producer, within five business days 
after receiving the additional information. 



Statutory Authority G.S. 
58-50-1 20(c)(7); 58-50-125(f). 



58-2-40(1 ), 



:$ :f :■;: % %f :f % % If Ifi % 



:Je %c l{e xge 2fi •£ 



iSotice is hereby given in accordance with G.S. 
150B-21.2 that the N. C. Department of Insurance 
intends to amend rules cited as 11 NCAC 14 
.0502, .0505, .0603 - .0604; and repeal rides- 
cited as 11 NCAC 14 .0301 - .0308. 

1 he proposed effective date of this action is April 
1. 1993. 



MXeason for Proposed Action: To modernize and 
improve the rules governing the monitoring of 
financial affairs of insurance companies. 

Lsomment Procedures; Written comments may he 
sent to Ray Martinez. P.O. Box 26387, Raleigh, 
N.C. 27611. Oral presentations may he made at 
the public hearing. Anyone having questions 
should call Ray Martinez, at (919) 733-5633 or 
Ellen Sprenkel at (919) 733-4529. 

CHAPTER 14 - ADMISSION 
REQUIREMENTS 

SECTION .0300 - HEALTH MAINTENANCE 
ORGANIZATIONS 



.0301 



FEASIBILITY STUDY AND MARKET 
SURVEY: HMO 



he 



{&) — Th e applicant shall p e rform, or caus e to 
p e rform e d, a f e a s ibility study as to th e pot e ntial 
success of the applicant based on th e propos e d 
plan of op e ration, t e rritory to b e s e rv e d, extent of 
s e rvic e s to b e off e r e d by th e applicant, availability 
of and — int e r es t — by — pro s p e ctiv e provid e rs, — are) 
int e r es t and s upport by th e citiz e nry with i n th e 
ar e a to b e se rv e d by th e applicant. 

fb) — A s a part of th e f e a s ibility study, a mark e t 
s urv e y shall b e conduct e d by qualifi e d p e rsonn e l of 
th e applicant or, if qualifi e d p e rsonn e l ar e not 
availabl e , th e applicant may cau se this s urv e y to 
be conducted by a recognized h e alth car e consul 

tefth T-fl+s — mark e t — s urv e y — s hould — r e ali s tically 

e stimate the applicant's pot e ntial succ e ss and be 
ba se d on logical and s ound a s sumptions. 

fe-) — Th e compl e t e d f e asibility study and mark e t 
surv e y shall be fil e d with th e commissioner for 
con s id e ration of th e assumptions, th e m e thodology 
and th e r e sults prior to proc ee ding with th e r e 
quir e m e nt s of 11 NCAC 1 4 .0302. — Th e com mis 



sion e r mu 



i t b e satisfi e d that th e 



assumptions ar e 
prov e n, th e m e thodology u se d th e r e in i s s ound and 
th e findings indicat e ampl e community support for, 
and pot e ntial succ e ss of. th e applicant. 

Statutory Authority G.S. 57A-4. 



1 he public hearing will be conducted at 10:00 
a.m. on February 5, 1993 at the Dobbs Building, 
3rd Floor Hearing Room, 430 N. Salisbury Street, 
Raleigh. N.C. 27611. 



.0302 CERTIFICATE OF AUTHORITY: 
HMO 

(*) — A C e rtificate of Authority may be prelimi 



narily is s u e d by th e commis s ion e r upc 



ipt and 



s ati s factory r e vi e w of th e following: 

fH application for C e rtificat e of Authority: 



7:20 



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January 15, 1993 



2304 



PROPOSED RULES 



{3} a copy of the basic organizational docu 

mcnt, if any, of the applicant such as 
the articles of incorporation, articles of 
a ss ociation, partner s hip agreement, or 
other — appl i cable — documents. — em4 — etU 
amendments thereto; 

(4-) a copy of the bylaws, rules and regula 

tions, — ef — similar document. — if any. 
regulating the conduct of the internal 
affairs of the applicant; 

{4} biographical — affidavits — fe — fee — form 

identified in 11 NCAC 1 4 .0 4 09 on 
each of the directors, officers, trustees 
and other principals of the applicant; 
a s tatement — general lv — describing — the 



m- 



HMO. — its health care plan or plans, 
facilities and personnel; 



&F 



financial 



statements showing 



-fee 



applicant's asset s , liabilitie s and sources 
of financial support; 
•fT} a description of the proposed method of 



marketing the plan; 



m- 



a statement reasons 



ibly d 



e s c n rung 



-fee 



geographic area or area s to be s erved 

by the applicant; 
{9} the results of the feasibility study and 

market — s urvey — as — de s cribed — m — 14 

NCAC 1 4 .0301; and 
f+Q-> if currently available, but in no case 

later than the time of the i ss uance of the 

Certificate of Authority pur s uant to 1 1 

NCAC 1 4 .0305: 



tA) — a copy of any contract made or to be 
made between any providers and the 
applicant; 

fB) — a copy of the form of evidence of 
coverage to be i ss ued to th e e nrollees; 

{G) — a copy of the form of the group con 
tract, if any. which is to be issued to 
employer s , union s , trustee s or other 
organizations. 
fb3 — The Certificate of Authority so issued shall 
©f4y — permit the — applicant to — solicit contingent 
enrollee subscriber s , to pre s ent the plan to employ 
er s and other groups on a contingent sub s cription 
basis and to enter into contingent contracts with 
providers through which health care and/or hospi 
tals services arc to be provided to enrollees and 
prospective enrollees of the applicant. — L'nder no 
condition s may applicant accept prepayment fees 
or commence the normal operations of an HMO 
prior to the is s uance of the Certificate of Authority 
in accordance with 1 1 NCAC 1 4 .0305. 



Statutory Authority G.S. 57A-3(c), -4. 



.0303 FINANCIAL CERTIFICATION: HMO 

After the applicant has performed, or caused to 
be performed, a feasibility s tudy on the proposed 
operations — of the — HMO and — has — developed — a 
s pecific plan of operation, this information should 
be submitted to the applicant' s staff actuary, a 
recognized — actuarial — consultant or a recognized 
health care consultant for completion of an actuari 
al projection of the anticipated operational results 
for a three year period based on the initial working 
capital of the applicant, any additional sources of 
fund s to be provided, the proposed rate schedules. 
fee — expected — number — of enrollees — during — fee 
period, and the applicant's plan or operation. Thi s 
projection should include, but not be limited to the 
following: 



tf*- 



ccrtification that the amount of money 
actually available for working capital is 
-afe 



s ufficient to carry 



acqui s ition costs 



m- 



and operating expenses for at least the 
three year period and that the applicant i s 
financially responsible and may rea s on 
ably be expected to meet its obligations 
to enrollees and prospective enrollees on 
a continuing basis; 

certification that the rate s to be charged 
by the applicant for prepaid health scrvic 
es are neither exces s ive, inadequate nor 
unfairly discriminatory; 

(4) determination of an adequate re insurance 

program to amply protect the applicant 
again s t large claim s arising in ca s e s of 
major health care needs of enrollee s , if 
the financial condition of the app l icant 
requires s uch a program; and 

f4) con si deration be given in the three year 

projection to the po s sible effects of ad 
verse selection — and over utilization of 
services by enrollees of the applicant. 



Statutory Authority G.S. 57A-3(c)(9), -4. -8(h)(2). 

.0304 RE-INSURANCE REQUIREMENTS: 
HMO 

tf- — indicated — m — the — financial — certification — as 
contained in 1 1 NCAC 1 4 .0303(3), the applicant 
shall be obligated to enter into re in s urance con 
tract s with a s olvent carrier in accordance with the 
adequate re in s urance program determined in and 
utilized for this actuarial certification. 

Statutory Authority G.S. 57A-4(b)(3). 



2305 



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January IS, 1993 



PROPOSED RULES 



.0305 ISSUANCE OF CERTIFICATE OF 
AUTHORITY: HMO 

fa) A — Certificate of Authority — granting the 

applicant full authority to operate as nn HMO shall 
be issued by the commi ss ioner upon payment of 
the application fee prescribed in G.S. 57A 20 and 
upon the commissioner being fully s ati s fi e d that 
the applicant has complied with the provisions of 
Chapter 57A of the North Carolina General Stat 
ute s and the requirement s contained herein, and all 
evidence presented ind i cate s the applicant to have 
a reasonable potential for s ucce ss in the operation 
of a health maintenance organization. 

fb) — Any material filed in accordance with 1 1 
NCAC — 1 4 .0302 which ha s materially changed 



4fat 



iginal date of filing with the cor 



sioner s hall be updated and refilcd prior to the 
granting of a Certificate of Authority. — The com 
missioncr may also require any additional informa 
tion for review as he deem s nece ss ary in making 
the deci s ion on the iss uance of thi s Certificate of 
Authority to the app l icant. 

fe) — All applicants not domiciled on this state 
must file a power of attorney du l y executed by 
such applicant appointing the commis s ioner and hi s 
s ucce ss or s in office, and duly authorized deputie s , 
as the true and lawful attorney of s uch applicant in 
and for thi s s tate upon whom all lawful proce ss in 
any legal action or proceeding against the health 
maintenance organization on a cau s e of action 
arising in thi s s tate may be s erved. 

Statutory Authority G.S. 57A-4. -3(c)(10). 



.0306 FOREIGN HMO: SUCCESSFUL 
OPERATION 

fa-) — Foreign health maintenance organization s 
seeking admi ss ion to North Carolina must have net 
operational gains for three consecutive years next 
preceding the date of application for admission; 
however, on an individual ca s e ba s is only, s uch 
applicants may be con s idered for admission if they 
have a minimum of one year of net operational 
gains and the financial certification a s de s cribed in 
1 1 NCAC 1 4 .0303 reflects continuing operational 
gain s for at least the next three years. 

(b) The three year operational gain requirement 
for a — foreign — health — maintenance — organization 
applying for admission to North Carolina may be 
waived by the Commiss i oner if such organization 
can satisfy all other prov i sions of G.S. 57B and 
the — requirement s — contained — herein — aftd — i f the 
organization is a subsidiary of. or affiliated with, 
an already licensed insurance company which: 
f-h has been licensed in North Carolina for 



a minimum often years: 

f2-) has — been successful — m — rts — in s urance 

operations; 

0j enjoys a satisfactory reputation in its 

dealings with it s North Carolina policy 
holder s ; 

{4} has a substantial degree of management 

control over the operations of the appli 
cant organization; and 

t$j can provide evidenc e that ample funds 

wfH — be — committed — by — the — insurance 
company in behalf of the health mainte 
nance organization to s upport the poten 
tial s ucce ss of the organization for at 
least a three year period, 
(e) Any fore i gn health maintenance organization 
which is granted a waiver pursuant to Paragraph 
(b) will be required to place on deposit with the 
Commi ss ioner, in addition to any other required 
depo s it s for admi ss ion, s ecuritie s in the amount of 
fifty thou s and dollar s ($50,000) of the kind and 
nature set forth under 11 NCAC 1 IB .0103. 



Statutorx Authority G.S. 57A-3; 58-150(2). 



.0307 DEPOSIT REQUIREMENTS: HMO 

fa) — A minimum i nitial depos i t of twenty five 
thou s and dollar s ($25,000) of market value eligible 
securities or such higher amount as may be indi 
eated by the actuarial projection shall be required 
of all s uch applicants prior to commencing the 
normal operat i on s of a health maint e nance organi 
zation in this state. 



f» — T4k 



addi 



fit 



te commi s sioner may require addition 
deposit s — ef — s«eft — organization s — when — deemed 
nece ss ary for the protection of North Carolina 
enrollees based upon one or more of the following 
condition s : 

f4-) The — organization — is — operating — w+th 

unsatisfactory r es ult s as determin e d by 
the commi ss ioner from an annual state 
ment. an interim financial statement or 
a report on examination; 

{3} The organization ha s s u s tained a s ub 

s tantial l o ss in working capital as re 
fleeted in an annual s tatement, an inter 
ini financial statement, or a report on 
examination; or 



&- 



The organization is found by the com 
missioncr to be — in such — an — unsound 
condition — that — sweh — organization — is 
potentially unab l e to fulfill enrollec and 
provider contracts. 



Statutory Authority G.S. 57B-4. -6. -17, -18. 



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January 15, 1993 



2306 



PROPOSED RULES 



.0308 ADMITTED ASSETS: HMO 

For the — purpose of determining the — working 
eapittil or net worth of any HMO seeking admi s 
sion to do bu s ine ss in this State and of any HMO 
admitted to do business in thi s State. — admitted 
assets for an HMO do not include: 

<-H prepaid expen s e s ; 






intangible assets; 



the dc 



iated 



ftRtt 



iepreeiated — eost — ©f — rurrntu re - 
equ i pment, except furniture and equip 
ment directly u s ed in providing medical 
services and electronic data processing 
equipment; 

i4j amounts receivable from affiliates that 

are outstanding for over 90 days; 

{§) amounts receivable from affiliates that do 

not have immediate resource s to repay 
the debts; nor 

(6) any other assets determined by the Com 

missioner to be of an illiquid nature. 
other than real property. 



Statutory Authority G.S. 58-2-40(1): 58-67-20; 
58-67-1 10(b). 

SECTION .0500 - ADMISSION OF A 

FOREIGN OR ALIEN INSURANCE 

COMPANY 

.0502 ANNUAL STATEMENTS. REPORTS 
ON EXAMINATION 

Foreign insurance companies applying for admis- 
sion to do business in North Carolina must submit 
for review by the Commissioner complete and 
certified copies of the applicable annual statements 
in the form required under 1 1 NCAC 1 IE .0102 
G.S. 58-2-165 for the three calendar years imme- 
diately preceding the date of application for admis- 
sion, together with the latest report on examination 
prepared by the insurance regulator of the state of 
domicile in the form required under I 1 NCAC 
11C .0102. Applicant companies should continue 
to submit such statements and reports in the form 
required as they become available throughout the 
admission process. 

Statutory Authority G.S. 58-2-40; 58-2-165; 
58-16-5(1). 

.0505 WAIVER OF THREE- YEAR NET 
OPERATIONAL GAIN 
REQUIREMENT 

(a) The three-year net operational gain require- 
ment for a foreign insurance company applying for 
admission to do business in North Carolina may be 



waived by the Department if the company meets 
all other requirements for admission and it is a 
subsidiary of. or affiliated under a holding compa- 
ny system, as defined in G.S. 58-19-5, with, a 
licensed insurance company that: 

(1) has been licensed in North Carolina for 
a minimum often years; 

(2) has been successful in its insurance 
operations; 

(3) enjoys a satisfactory reputation in its 
dealings with its North Carolina policy- 
holders; and 

(4) has a substantial degree of management 
control over the operations of the appli- 
cant company. 

The affiliated company must guarantee to maintain 
the capital and surplus of the applicant company at 
or above the admission requirements in North 
Carolina for a minimum of three years or until the 
applicant company can provide a report on exami- 
nation that certifies three consecutive years of net 
gains from operations, whichever last occurs. The 
forms for making such a guarantee are described 
in Rules .0421 and .0422 of this Chapter. The 
affiliated company must reflect sufficient financial 
strength to support such a guarantee. Any appli- 
cant company that is granted a waiver of this 
requirement shall place on deposit with the Com- 
missioner, in addition to any other minimum 
required deposits for admission, qualified securi- 
ties in the amount of one hundred thousand dollars 
($100,000) of the kind and nature set forth under 
1 1 NCAC 1 IB .0103 G.S. 58-5-20 . 

(b) On an individual case basis, a foreign life 
insurance company may be considered for admis- 
sion if it has a minimum of one year of net opera- 
tional gains and can provide a certified financial 
projection, prepared by an actuary, an actuarial 
firm, or a certified public accountant, satisfactory 
to the Commissioner, reflecting continuing opera- 
tional gains for at least the next three years. This 
financial projection must contain adequate details 
of all income revenue and expense items sufficient 
for proper evaluation. All assumptions used in the 
preparation of such a projection must be included 
with the filing. Any applicant company that is 
granted a waiver under this Rule shall place on 
deposit with the Commissioner, in addition to any 
other minimum required deposits for admission, 
eligible securities in the amount of one hundred 
thousand dollars ($100,000) of the kind and nature 
set forth under 11 NCAC 11B .0103 G.S. 58-5-20 . 

(c) A foreign fire, casualty, or fire and casualty 
insurance company may be considered for a waiver 
of the three-year net operational gain requirement 



2307 



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January 15, 1993 



PROPOSED RULES 



under the following conditions: 

( 1 ) the applicant company must have been 
in business for at least five years under 
the same ultimate ownership and writ- 
ing basically the same lines of business; 

(2) the applicant company must have re- 
flected net gains from its operations for 
at least three of the last five years; or 
must reflect verifiable total statutory 
capital and surplus in excess of fifty 
million dollars ($50,000,000) in its 
most recent annual statement; 

(3) the applicant company must provide 
certification of the adequacy of its loss 
and loss adjustment expense reserves, 
satisfactory to the Commissioner, as 
they pertain to the most recent annual 
statement; and 

(4) the applicant company must reflect 
verifiable total statutory capital and 
surplus in excess of ten million dollars 
($10,000,000) on its most recent annual 
statement. 

Any company that is granted a waiver under this 
provision shall place on deposit with the Commis- 
sioner, in addition to any other minimum required 
deposits for admission, eligible securities in the 
amount of five hundred thousand dollars 
($500,000) of the kind and nature set forth under 
11 NCAC 1 IB .0103 G.S. 58-5-20. 



Statutory Authority 

58-5-40; 58-16-5(2). 



G.S. 58-2-40: 58-5-20; 



SECTION .0600 - SURPLUS LINES 

.0603 FINANCIAL INFORMATION 
REQUIRED 

Each request for surplus lines eligibility shall be 
accompanied by the following financial informa- 
tion so that verification of compliance with the 
eligibility requirements can be made: 

( 1 ) annual statements for the preceding two 
years in the form required under +4- 
NCAC HE .0102 G.S. 58-2-165 for 
companies licensed in at least one state in 
the United States; 

(2) annual financial reports for the preceding 
two years in the English language and in 
U.S. dollar s dollar amounts for alien 
insurance companies; 

(3) a certified copy of the latest report on 
examination or, if the company is not 
required to be examined by any jurisdic- 
tion, a copy of the latest CPA report and 



management letter; 

(4) actuarial certification of the loss reserves 
and loss adjustment expense reserves for 
the most recent year if such certification 
is available; and 

(5) a copy of the NA1C financial ratio (IRIS) 
results for the most recent year, along 
with an explanation for any unusual 
values if such tests are performed; 

(6) an alien insurer must file a copy of its 
United States trust agreement; and must 
also file with and be approved by the 
Nonadmitted Insurers Information Office 
of the NAIC to be considered for eligibil- 
ity in North Carolina. 

Statutory Authority G.S. 58-2-40; 58-2-165; 
58-21-20. 

.0604 REQUIREMENTS FOR CONTINUED 
ELIGIBILITY 

(a) Once a company is deemed to be eligible to 
write surplus lines business and is placed on the 
Department's list, it may remain on the list each 
month as long as it remains in good repute and 
continues to satisfy the eligibility requirements of 
G.S. 58-21-20(a). 

(b) Any eligible company with total capital and 
surplus of f4ve — million — f+ve — hundred thou s and 
dollar s — ($5,500,000) fifteen million dollars 
($15.000.000) or less must file quarterly financial 
statements within 45 days after the end of each 
quarter. 

(c) All eligible companies licensed in at least 
one state in the United States must file annual 
statements each year in the form required under +4 
NCAC HE .0102 G.S. 58-2-165 by March 1 of 
the following year. 

(d) Each eligible alien company must file annual 
financial reports in the English language and in 
U.S. dollars dollar amounts within six months 
after the close of its fiscal year. 

Statutory Authority- G.S. 58-2-40; 58-2-165; 
58-21-20; 58-21-30. 

TITLE 15A - DEPARTMENT OF 

ENVIRONMENT, HEALTH. AND 

NATURAL RESOURCES 

1\ otice is hereby given in accordance with G.S. 
150B-21.2 that the EHNR - Division of Environ- 
mental Management, Water Quality Section intends 
to adopt rules cited as 15 A NCAC 8A .0303; 8B 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2308 



PROPOSED RULES 



.0205. .0207 - .0213. .0406. .0506; 8C .0005 - 
.0008; amend rules cited as 15A NCAC 8A .0101 
- .0102. .0202. .0301 - .0302; 8B .0101 - .0102. 
.0108 - .0109. .0201 - .0202. .0214. .0301 - 
.0303. .0402. .0404. .0502; 8C .0002. .0004; 8D 
.0002, .0004 - .0006; and repeal rule tired as 15A 
NCAC 8B .0206. 

(Editor 's Note; T7u> agency is proposing to renum- 
ber existing Rule ISA NCAC 8B .0205 to 15A 
NCAC 8B .0214.) 

1 he proposed effective date of this action is May 
3. 1993. 

1 he public hearings will be conducted at 7:00 
p.m. on the following dates and locations: 

February 15, 1993 

Archdale Bldg. 

512 N. Salisbury Street 

Raleigh. NC 27611 

February 16, 1993 

Western Piedmont Community College 

1001 Burkemont Ave. 

Morganton. NC 28655-9978 

MYeasonfor Proposed Action: These changes are 
proposed in order to establish new certification 
programs and classification systems for water 
pollution control system* requiring mandatory 
certification of operators due to statutory changes 
in 1991. 

Comment Procedures: Written comments should 
be submitted to the Chairman, Water Pollution 
Control System Operators Certification Commis- 
sion, PO Box 29535. Raleigh. NC 27626-0535. 
Comments must be postmarked by February 24, 
1993. 

fiscal Note: These Rules affect the expenditures 
or revenues of local funds. A fiscal note was 
submitted to the Fiscal Research Division on 
December 8. 1992. OSBM on December 8. 1992. 
N C. League of Municipalities on December 9. 
1992. and N.C. Association of Count}' Commis- 
sioners on December 9. 1992. 

CHAPTER 8 - WATER POLLUTION 
CONTROL SYSTEM OPERATORS 



CERTIFICATION COYLMISSION 

SUBCHAPTER 8A - AUTHORITY: 

ORGANIZATION: STRUCTURE: 

DEFINITIONS AND HEARING 

PROCEDURES 

SECTION .0100 - DEFINITIONS AND 
ORGANIZATION 



.0101 DEFINITIONS 

(a) "Certification Commission" is the 
Wastewater — Treatment — Plant Water Pollution 
Control System Operators Certification Commis- 
sion created by G.S. 143B-300. 

(b) "Conditional Certificate" is a permanent 
certificate issued by the Certification Commission 
to an individual as the result of passing an exami- 
nation administered by the Certification Commis- 
sion and which is valid only for a specified type 
and grade of wastewater treatment water pollution 
control facility system . It is subject to the provi- 
sions of G.S. 90A-40(a). 

(c) "Contract Operation Firm" is any commer- 
cial wa s tewater treatment water pollution control 
system operation firm contracting with wastewater 
treatment works water pollution control systems 
pursuant to G.S. 90A-45(a). 

(d) "Operator in Responsible Charge" is the 
operator designated to fulfill the requirements of 
G.S. 90A-44. 

(e) "Owner" is that person, firm, or corporation 
described in G.S. 90A-44. 

(fi "Permanent Certificate" is that certificate of 
competence and experience issued by the Certifica- 
tion Commission to an individual as the result of 
passing an examination administered by the Certif- 
ication Commission or issued by the Certification 
Commission by reciprocity. It is subject to the 
provisions of G.S. 90A-40(a). 

(g) "Reciprocity Certificate" is that certification 
allowed under G.S. 90A-40(b). 

(h) "Temporary Certificate" is that certificate 
issued to an individual by the Certification Com- 
mission when the conditions of G.S. 90A-40(e) are 
met. 

( i I "Wastewater Treatment — Facility" Water 
Pollution Control System is any facility classified 
under the provisions of G.S. 90A-37. 

Statutory Authority G.S. 90 A- 37; 90A-38; 90A-40; 
90A-44: 90A-45; 143B-300: 150B-2<4). 

.0102 CREATION 



2309 



7:20 



XORTH CAROLINA REGISTER 



January IS, 1993 



PROPOSED RULES 



The Wastewater Treatment Plant Operators 
Certification Commission, was created July 1. 
1969, it was renamed the Water Pollution Control 
System Operators Certification Commission on 
July 10, 1991. 

Statutory Authority G.S. 143B-300. 

.0202 DUTIES AND REQUIREMENTS 

(a) Refunding of Fees. When refunding of fees 
becomes necessary, it will be the commission's 
Commission's responsibility or the responsibility 
of their designee to determine the fees or portion 
of fees to be refunded in accordance with 15A 
NCAC 8B .0502. 

(b) Federal Grants-in-Aid. The Certification 
Commission is authorized and empowered to adopt 
such rules and regulations not inconsistent with the 
laws of the state as may be required by the federal 
government for grants-in-aid for programs con- 
cerned with the certification of wa s tewater treat 
m e nt plant water pollution control system opera- 
tors which may be made available to the state by 
the federal government. This is to be liberally 
construed in order that the state and its citizens 
may benefit from such grants-in-aid. 

(c) Requirements for Certified Operators of 
Systems Permitted Under Rules Adopted by the 
Environmental Management Commission. 

( 1 ) The owner must submit a letter to the 
Certification Commission which either 
designates the Operator in Responsible 
Charge and is countersigned by this 
operator or the Contract Operation 
Firm which has been engaged to pro- 
vide operational services and is counter- 
signed by the firm. If a Contract Oper- 
ation Firm has been engaged, the Con- 
tract Operation Firm must submit a 
letter to the Certification Commission 
which designates the Operator in Re- 
sponsible Charge and is countersigned 
by both the owner and the designed 
operator. This (these letter(s) must be 
submitted within 30 days after: 

(A) a new wastewater treatment facility 
water pollution control system is 50 
percent completed. 

(B) notification of classification or change 
of classification of an existing facility 
system has been received; or 

(C) a new operator in responsible charge 
is designated. 

(2) Owners are required as of October 1, 
1991 to provide an appropriately 



(3) 



trained and certified back-up operator 
of the appropriate type and any grade, 
to serve as surrogate for the ORC set 
forth in Paragraph (c)(5)(B) of this Rule 
when the ORC is unavailable due to 
illness, vacation, or job related absence 
that is temporary in nature, not to 
exceed 60 days if the back-up operator 
holds a certificate of a lower grade than 
the classification of the facility and 90 
days if the back-up operator holds a 
certificate of the same grade as the 
classification of the facility. If the 
absence of the ORC will exceed this 
time period, a new ORC of the appro- 
priate type and grade must be designat- 
ed for the system. The owner must 
submit a letter to the Certification 
Commission which either designates the 
back-up operator and is countersigned 
by this operator or the Contract Opera- 
tion Firm which has been engaged to 
provide operational services and is 
countersigned by the firm. If a Con- 
tract Operation Firm has been engaged, 
the Contract Operation Firm must 
submit a letter to the Certification 
Commission which designated the 
back-up operator and is countersigned 
by both the owner and the designated 
operator. This (these) letter(s) must be 
submitted within 30 days after: and to 
inform the Certification Commi ss ion in 
writing when: 

(A) an individual formerly de s ignated as 
the Operator in Responsible Charge i s 
no longer performing the s e dutie s : or 
the system \s classified; or 

(B) a Contract Operation Firm formerly 
designated to be respon s ible for oper 
ation and maintenance is no longer 
performing — the s e — dutie s . a new 
back-up operator is designated. 

A Contract Operation Firm is required 
to inform the Certification Commi s sion 
in writing within 30 day s when: The 
owner must inform the Certification 
Commission in writing when: 



(A) 



(B) 



an individual formerly designated as 
the Operator in Responsible Charge 
or the back-up operator is no longer 
performing these duties; or 
a Contract Operation Firm formerly 
designated to be responsible for oper- 
ation and maintenance is no longer 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2310 



PROPOSED RULES 



performing these duties. 
(4) A Contract Operation Firm js required 
to inform the Certification Commission 
in writing within 30 days when: 

(A) an individual formerly designated as 
the Operator in Responsible Charge 
or the back-up operator is no longer 
performing these duties; or 

(B) a Contract Operation Firm formerly 
designated to be responsible for the 
operation and maintenance is no 
longer performing these duties. This 
letter shall indicate the date of the 
change in the status of the Operator in 
Responsible Charge or back-up opera- 
tor the Contract Operation Firm and 
the name of the new designee, er- 
Contract Operation Firm a s required 
in 8A .0202(d)(2) . 

(4) (5) In order to qualify as operator in re 
sponsib l e charge the Operator [n Re- 
sponsible Charge of a particular 
wastewater — treatment — facility , water 
pollution control system , an operator: 

(A) must possess one, or more of the 
certificates listed in G.S. 90A 4 Rule 
.0200 of this Subchapter, of a the 
type(s) and grade(s) at least equivalent 
to the types and classification(s) of the 
facility system : 

(B) must, if the designated ORC of a 
wastewater treatment facility, be 
responsible for, and as of October 1 , 
1991, must visit each class I 
wastewater treatment facility and 
spray irrigation facility at least week- 
ly, and each class II. class III and 
class IV wastewater treatment facility 
at least daily, excluding weekend s and 
holidays, five days per week, exclud- 
ing holidays, with the exception of 
single-family systems, including Aero- 
bic Treatment Units (ATl)'s) with a 
design of less than 1 500 gallons per 
day of domestic wastewater, which 
shall be visited weekly and other 
single-family systems which shall be 
visited annually: and shall document 
visits to the facility : and 

(C) The Operator in Respon s ible Charge 
must properly manage and document 
daily operation and maintenance^ 
certify monitoring and reporting 
information as prescribed in the per- 
mit, and reside within reasonable 



proximity of the facility system , to be 
readily available for consultation, 
emergencies, regulatory agency in- 
spection and similar matters; and 
{€■) (D)may be an employee of a Contract 
Operation Finn so long as this em- 
ployee meets all requirements in 
Paragraphs (c){5}(AX, aad (B) and (C) 
of this Rule. 
(d) Requirements for Certified Operators of 
Systems Permitted Under Rules Adopted by the 
Commission for Health Services or a local board 
of health. 

( 1 ) The owner shall submit a letter to the 
local health department in which the 
system is located which either desig- 
nates the Operator in Responsible 
Charge and js countersigned by this 
operator, or designates a Contract 
Operation Firm or Public Management 
Entity, which has been engaged to 
provide operational services. If a 
Contract Operation Firm or Public 
Management Entity has been engaged, 
the Contract Operation Firm or Public 
Management Entity must submit a letter 
to the local health department which 
designates the Operator in Responsible 
Charge and js countersigned by both 
the owner and the designated operator. 
This (these) letter(s) must be received 
prior to fhe issuance of the operation 
permit or within 30 days of: 

(A) notification of classification or change 
of classification of an existing system 
has been received; or 

(B) a new operator js designated. 

(2) Owners are required to provide an 
appropriately trained and certified 
back-up operator of tine appropriate 
type and any grade for any classified 
wastewater treatment plant, with the 
exception of Aerobic Treatment Units, 
to serve as surrogate for the ORC set 
forth in Paragraph (d)(5)(B) of this Rule 
when the ORC is unavailable due to 
illness, vacation, or job related absence 
that is temporary in nature, not to 
exceed 60 days if the back-up operator 
holds a certificate of a lower grade than 
the classification of the facility and 90 
days if the hack-up operator holds a 
certificate of th_e same grade as the 
classification of the facility. If the 
absence of the ORC will exceed this 



2311 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



time period, a new ORC of the appro- 
priate type and grade must be designat- 
ed for the system. 

(3) Owners are required to inform the local 
health department [n writing when: 

(A) an individual formerly designated as 
the ORC or the back-up operator (if 
required) js no longer performing 
these duties: or 

(B) a Contract Operation Firm or Public 
Management Entity, formerly desig- 
nated to be responsible for operation 
and maintenance js no longer per- 
forming these duties. 

(4) A Contract Operation Firm or Public 
Management Entity must notify the 
local health department in writing 
when: 

(A) an individual formerly designated as 
the ORC or back-up operator (if 
required) is no longer performing 
these duties; or 

(B) a Contract Operation Firm or Public 
Management Entity formerly designat- 
ed to be responsible for operation and 
maintenance is no longer performing 
these duties. This letter shall indicate 
the date of the change in status of the 
ORC or the back-up operator (if 
required) or the Contract Operation 
Firm or Public Management Entity 
and the name of the new designee or 
Contract Operation Firm or Public 
Management entity, countersigned by 
the new ORC or back-up operator (if 
required). 

(5) In order to qualify as Operator in Re- 
sponsible Charge of a particular system 
an operator: 

(A) must possess one, or more of the 
certificates listed in Rule .0200 of this 
Subchapter, of the type(s) and 
grade(s) at least equivalent to the 
type(s) and classification(s) of the 
system. 

(B) must be responsible for and must visit 
each system as specified i_n I5A 
NCAC 18A .1961. The ORC must 
properly manage and document opera- 
tion and maintenance; certify monitor- 
ing and reporting information as 
prescribed in the permit and reside 
within reasonable proximity of the 
facility to be readily available for 
consultation, emergencies, regulatory 



agency inspections and similar mat- 
ters; and 
(C) must, if the designated ORC of a 
wastewater treatment facility that fs 
classified as a Class II, Class III or 
Class IV wastewater treatment facili- 



ty, must visit each Class II. Class III 
and Class IV facility at least five days 
per week, excluding holidays. Aero- 
bic Treatment Units (ATU's) that are 
used as pretreatment for subsurface 
disposal of domestic wastewater with 
a design flow of under 1 .500 gallons 
per day shall be visited by the ORC 
on a monthly basis. The ORC shall 
document the visits made to each 
facility. 



Statutory Authority 
through 90A-43. 



G.S. 143B-300; 90A-37 



SECTION .0300 - HEARING PROCEDURES 

.0301 RULE MAKING PROCEDURES 

The Wastewater Treatment Plant Water Pollution 
Control System Operators Certification Commis- 
sion adopts incorporates by reference 15A NCAC 
IB .0100 for the purpose of its rule making proce- 
dures. 

Statutory Authority G.S. 143B-300. 

.0302 CONTESTED CASE PROCEDURES 

The — Wastewater — Tr e atment — Plant — Operator s 
Certification Commi ss ion adopt s by reference 15A 
NCAC IB .0200 for the purpose of adjudicating 
conte s ted ca s e s . 

(a) Administrative hearings shall be held fn 
accordance with G.S. 150B. and the administrative 
hearing procedures codified at j_5 A NCAC IB 
.0200 et seq . . are hereby incorporated by refer- 
ence including any subsequent amendments and 
additions. 

(b) Copies of _L5_A NCAC J_B .0200 may be 
inspected at the offices of the Division of Planning 
and Assessment. 512 North Salisbury Street. 8th 
Floor. Archdale Building. Raleigh. North Caroli- 
na 2761 1 . Copies may obtained at the previous 
location or from the Rules Division of the N.C. 
Office of Administrative Hearings at a cost set by 
those offices. 

Statutory Authority G.S. 143B-300: 150B-2(4). 

.0303 PETITIONS FOR REGULATORY 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2312 



PROPOSED RULES 



ACTIVITY 

(a) Any person(s) desiring to request the adop- 
tion, amendment, or repeal of a rule may make 
such request in a petition filed pursuant to G.S. 
150B-20, addressed to the Water Pollution Control 



System Operators Certification Commission and 
mailed to the Chairman, at P.O. Box 29535. 
Raleigh. North Carolina. 27626-0535. Such 
petitions shall contain the folio wing information: 

( 1 ) A draft of the proposed rule or a sum- 
mary of its intent. 

(2) Reasons for adoption of the proposed 
rule(s) and effect on existing rules and 
practices. 

(3) Name and address of the petitioner(s). 
(b) Petitions will be placed on the agenda of the 

next regularly scheduled meeting of the Commis- 
sion if received at least four weeks prior to the 
meeting. The Chairman will prepare recommend- 
ed responses to petitions for the Commission's 
consideration. Petitions will be considered in 
accordance with the requirements of G.S. 
150B-20. 



Statutory Authority G.S. 113-134: 143B-289A; 
150B-20. 

SUBCHAPTER 8B - CERTIFICATION OF 
OPERATORS 

SECTION .0100 - APPLICATION FOR 

EXAMINATION AND CERTIFICATION: 

AND NOTIFICATION OF CHANGE OF 

ADDRESS 

.0101 APPLICATION FORM 

(a) An application which is designed for request- 
ing certification as a wastewater treatment plant 
water pollution control system operator by way of 
examination, temporary certification, reciprocity 
certification, conditional certification, or conver- 
sion from voluntary certification must be properly 
and accurately completed and submitted with the 
appropriate fee to the office of the chairman of the 
certification commission Certification Commission . 

(b) Incomplete applications and applications not 
accompanied by appropriate fee and attachments 
cannot be processed and will be returned to the 
applicant. 

Statutory Authority G.S. 90A-39; 90A-42; 
143B-300. 

.0102 APPLYING FOR EXAMLNATION 

(a) An application being filed for examination 



shall be postmarked by the United States Postal 
Service at least filed with the commission 30 days 
prior to the date upon which the examination is 
scheduled to be administered and the appropriate 
fee must accompany the application. 

(b) Upon receipt of the application by the 
commi ss ion Commission , the application will be 
reviewed by the designee(sl of the Commission for 
eligibility to take the examination. The applicant 
will be notified by letter of their eligibility and will 
be advised of the date, time and place of the 
examination. A receipt for the examination fee 
will accompany the letter. In cases where the 
applicant is ineligible for examination, he they will 
also be notified by letter and advised the reason ©f 
for ineligibility. The examination fee will be 
refunded in the event that the applicant is deter- 
mined to be ineligible for the examination. A 
refund — cheek — for the examination — fee will — be 
prepared and — forwarded — under separate — cover. 
Upon learning of ineligibility, the applicant may 
request a hearing before the certification eommi s 
s4»r Commission at the next regularly scheduled 
meeting, relative to the ineligibility, if he the 
applicant so desires. Such requests must be in 
writing and shall be submitted at least 30 days 
prior to the next regularly scheduled meeting. 

Statutory Authority G.S. 90A-39; 90A-42; 
143B-300; 150B-23. 

.0108 ADDRESS FOR REQUESTING AND 
RETURNTNG APPLICATIONS 

Applications are obtainable from and should be 
returned to: Chairman. Wastewater Treatment 
Plant Water Pollution Control System Operators 
Certification Commission. Department of Environ- 
ment, Health, and Natural Resources, P. O. Box 
2-76S7 29535 . Raleigh. North Carolina 37644 
27626-0535. 



Statutory Authority- G.S. 90A-39; 90A-42; 
143B-300. 

.0109 REQUIREMENT FOR 

NOTIFICATION OF CHANGE IN 
ADDRESS 

Holders of certificates under this program shall 
notify the Chairman. Wastewater Treatment Plant 
Water Pollution Control System Operators Certifi- 
cation Commission. Department of Environment. 
Health, and Natural Resources, P. O. Box 27687 

^7644 



29535 . Raleigh. North Carolina 
27626-0535, in writing of any change in address. 



2313 



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XORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Statutory Authority G.S. 90A-35; 90A-43; 
143B-300. 

SECTION .0200 - EDUCATION AND 

EXPERIENCE FOR CERTIFIED WATER 

POLLUTION CONTROL SYSTEM 

OPERATORS 

.0201 GRADE I WASTEWATER 

TREATMENT PLANT OPERATOR 

An applicant for a grade I certificate (lowest) 
shall be expected to have a general knowledge of 
the operation of small treatment plants. The 
applicant shall have knowledge of the laws and 
regulations related to wastewater treatment plant 
operation and knowledge of equipment usually 
employed in such plants, and be able to describe 
the general maintenance requirements for such 
plant units. The applicant must submit an applica- 
tion showing that one of the following prerequisite 
combinations of training and experience has been 
met in order to take the grade I examination: 

(1) three years of acceptable experience in 
wastewater treatment plant operation; 

(2) completion of eighth grade of school and 
two years of acceptable experience in 
wastewater treatment plant operation; 

(3) satisfactory completion of a Grade I 
approved training school for wastewater 
treatment plant operators and one year of 
acceptable experience in wastewater 
treatment plant operation; 

(4) graduate of a high school, or equivalent 
GED, and three months of acceptable 
experience in wastewater treatment plant 
operation; 

(5) graduate of a high school or equivalent 
GED or a two or four year college and 
completion of approved training school. 
Provided, however, that if an applicant 
fails the Grade 1 examination after three 
attempts, the applicant must then satisfac- 
torily complete a Grade I approved train- 
ing school before taking the Grade I 
examination again. 

Statutory Authority G.S. 90A-39; 143B-300. 



pling thereof; a general knowledge of the proce- 
dure involved in making basic physical and chemi- 
cal tests and their application to treatment plant 
control and knowledge of the laws and regulations 
related to wastewater treatment plant operation; the 
ability to make simple calculations; general knowl- 
edge of the proper maintenance of the various 
treatment plant units and the mechanical equipment 
involved; the ability to keep and interpret records; 
the ability to practice safety and maintain good 
public relations; and such other information as 
may be deemed pertinent by the Wa s tewat e r 
Treatment Plant Water Pollution Control System 
Operators Certification Commission. 

(b) The applicant must submit an application 
showing that one of the following prerequisite 
combinations of training and experience has been 
met in order to take the grade II examination: 

(1) satisfactory completion of a Grade II 
approved training school for wastewater 
treatment plant operators and two years 
of acceptable experience in a North 
Carolina class I, or equivalent, 
wastewater treatment plant or higher; 

(2) a an active North Carolina grade I 
certificate, or equivalent, and one year 
of acceptable operator experience in a 
North Carolina class I, or equivalent, 
wastewater treatment plant or higher; 

(3) graduate of high school, or equivalent 
GED, and six months of acceptable 
experience in a North Carolina class I, 
or equivalent, wastewater treatment 
plant or higher; 

(4) graduate of a recognized two-year 
college or technical school or college or 
university and six months of acceptable 
experience in wastewater treatment 
operation. Provided, however, that if 
an applicant fails the Grade II examina- 
tion after three attempts, the applicant 
must then satisfactorily complete a 
Grade II approved training school 
before taking the Grade II examination 
again. 

Statuton' Authority' G.S. 90A-39; 143B-300. 



.0202 GRADE II WASTEWATER 

TREATMENT PLANT OPERATOR 

(a) An applicant for a grade II certificate shall 
be expected to have a general knowledge of the 
various types of wastewater treatment plants and 
the processes involved; a general knowledge of the 
composition of wastewater and the proper sam- 



.0205 GRADE I COLLECTION SYSTEM 
OPERATOR 

(a) An applicant for a grade I collection system 
certificate (lowest) shall have a basic knowledge of 
the purpose and operation of a collection system 
and shall be able to perform basic tasks in a 
manner that does not endanger himself/herself or 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2314 



PROPOSED RULES 



others. 

(bi The applicant must submit an application 
showing that one of the following prerequisite 
combinations of training and experience has been 
met m order to take the Grade I Collection Sys- 
tems examination: 



(1 



Qi 



ii) 



t\vo years of acceptable experience and 
completion of an approved training 
school for Grade I Collection Systems: 
completion of the eighth grade and one 
year of acceptable experience and com- 
pletion of an approved training school 
for Grade I Collection Systems: 
graduate of high school or equivalent 
GED and completion of an approved 
training school for Grade I Collection 
S\ stems. 



Provided, however that if an applicant fails the 
Grade I Collection Systems examination after three 
attempts, the applicant must then satisfactorily 
complete a Grade I Collection Systems approved 
training school before taking the Grade I Collec- 
tion Systems examination again. 

Statutory Authority G.S. 90A-39; 143B-300. 

.0206 WAIVER OF EXAMINATION 

ELIGIBILITY REQUIREMENTS 

fa-t — The educational and or experience require 
meets for eligibility for examinations for perma 
nent certification may be waived by the eommi s 
sion. in its discretion, on a case by case basis 
provided it finds: 



<+ 



-Vf* 



-a 



Pfi 



icant 



-ttw 



quely — qualified 



+2-H 



through education and or experience for 
the grade certification s ought although 
the e ducation or experience — require 
meats in 8B .0201 to .020 4 of this 
Chapter may not be s trictly met: or 
That the plant at which the applicant is 



currently the operator in responsible has 
been recla ss ified a minimum of two 
grade levels higher, s uch that the appli 



eafrt — cannot — meet — aH — fe« 



education 



and or — e xperience — requirements — fef 
certification at the grade to which the 
plant ha s been cla s sified. 
The declaration of eligibility for examination for 
certification to a grade by waiver of requirements 
is an extraordinary action in the s ole di s cr e tion of 
the commi ss ion, and is not the right of anv appli 
cant. 

+4=h — The procedure to be followed in reque s ting 
of the — commission a — waiver of the education 
and or experience requirements for eligibility for 



examination for permanent certification shall be as 
follows: 

f-h Applicant mu s t petition the commis s ion 

for a waiver of education or experience 

requirements: 
+2-> Petition — must — document — the — eireum 

s tance s — which — qualify — fee — applicant 

under (a)(1) or (2) of thi s Rule: 
f3-) Staff will review the petition and submit 

it to the commission at its next regular 

ly s cheduled meeting with the reeom 

mendation s : 
f4-) The applicant may appear at the meet 

ing at which the commission considers 

the petition: 
fS-) The commission will consider the peti 



tion. and decide whether or not to make 
a waiver in the applicant's case and the 
chairman shall inform the applicant in 
writing of the commission's decision. 



Statutory Authority G.S. 90 A- 39: 143B-300. 

.0207 GRADE II COLLECTION SYSTEM 
OPERATOR 

(a) An applicant for a grade II collection sys- 
tems certificate shall be expected to install, main- 
tain and repair various components of a collection 
system in a safe manner. 

(b) Applicant must hold a current Grade I 
Collection System certificate for six months and 
must submit an application showing that the fol- 
lowing prerequisite combinations of training and 
experience have been met in order to take the 
Grade II collection Systems examination: 

( 1 ) Provide documentation from the appli- 
cants supervisor that the following tasks 
have been completed prior to the train- 
ing school: 

(A) make a sewer tap with a machine 

(B) install a sewer cleanout 

(C) demonstrate ability' to properly oper- 
ate some sewer maintenance equip- 
ment 



(2 i Have two years of acceptable experi- 
ence and completion of an approved 
training school for Grade H Collection 
Sxstems. 
Provided, however, that if an applicant fails the 
Grade II Collection Systems examination after 
three attempts, the applicant must then satisfactori- 
ly complete a Grade I] Collection Systems ap- 
proved training school before taking the Grade U 
Collection Systems examination again. 



2315 



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XORTH CAROLIXA REGISTER 



January L\ 1993 



PROPOSED RULES 



Statutory Authority G.S. 90A-39; 143B-300. 

.0208 GRADE III COLLECTION SYSTEM 
OPERATOR 

(a) An applicant for a grade III collection 
systems certificate shall be expected to ensure 
safety, and perform and supervise installation and 
maintenance of a collection system while maintain- 
ing records and public relations. 

(b) Applicant must hold a current Grade II 
collection System certificate for six months and 
must submit an application showing that the fol- 
lowing prerequisite combinations of training and 
experience have been met: 

( 1 ) Hold a current CPR certification 

(2) Have three years of acceptable experi- 
ence and completion of an approved 
training school for Grade HI Collection 
Systems. 

Provided, however, that if an applicant fails the 
Grade III Collection Systems examination after 
three attempts, the applicant must then satisfactori- 
ly complete a Grade III Collection Systems ap- 
proved training school before taking the Grade III 
Collection Systems examination again. 

Statutory Authority G.S. 90A-39; 143B-300. 

.0209 GRADE IV COLLECTION SYSTEM 
OPERATOR 

(a) An applicant for grade IV collection systems 
certificate shall be expected to supervise employees 
and manage the overall installation, o peration and 
maintenance of collection systems in a safe man- 
ner. 

(b) Applicant must hold a current Grade III 
Collection System certificate for six months and 
must submit an application showing that the fol- 
lowing prerequisite combinations of training and 
experience have been met: 

(1) Hold a current CPR certification 



(31 



Completion of two hours of approved 
confined spaces training 
Have four years of acceptable experi- 
ence and completion of an approved 
training school for Grade IV Collection 
Systems. 
Provided, however that if an applicant fails the 
Grade IV Collection Systems examination after 
three attempts, the applicant must then satisfactori- 
ly complete a Grade IV Collection Systems ap- 
proved training school before taking the Grade IV 
Collection Systems examination again. 

Statutory Authority G.S. 90A-39; 143 B-300. 



.0210 SUBSURFACE SYSTEM OPERATOR 

(a) An applicant for a Subsurface System Opera- 
tor certificate shall be expected to have specific 
knowledge regarding the subsurface treatment and 
disposal of wastewater. The applicant shall have 
knowledge of the principals of the soil as a treat- 
ment system and the design and construction of 
subsurface treatment and disposal systems. The 
applicant shall be familiar with wastewater charac- 
teristics and the proper operation and maintenance 
of a septic tank, pump tank, sand filter, grease 
trap/ grease interceptor, oil/water separator, con- 
ventional subsurface system, low pressure pipe 
system, and other alternative subsurface systems, 
including those consisting of multiple drain fields. 
The applicant shall also be familiar with various 
pumps, distribution mechanisms and electronic 
controls commonly used in these systems; and 
shall have the ability to make calculations and 
measure wastewater flow rates in these systems by 
various means. The applicant shall also have the 
ability to keep and interpret records and to com- 
plete reports as required by the permit. 

(b) The applicant shall submit an application 
showing that one of the following prerequisite 
combinations of training and experience is met [n 
order to take the Subsurface System examination. 

(1) three years of acceptable experience in 
subsurface system operation, installation, 
inspection or design and the successful 
completion of an approved subsurface 
training school; or 

(2) completion of the eighth grade and have 
two years of experience in subsurface 
system operation, installation, inspec- 
tion or design and the successful com- 
pletion of an approved subsurface train- 
ing school; or 

(3) be a graduate of high school or have 
earned an equivalent GED and have one 
year of ex perience in subsurface system 
operation, insolation, inspection or 
design and successful completion of an 
approved subsurface training school; or 

(4) be a graduate of two or four year col- 
lege (with a minimum of 900 contact 
hours) with academic preparation in 
chemistry, biology, public health, geol- 
ogy, environmental science, agronomy, 
soils engineering, or a related field and 
successful completion of an approved 
subsurface training school; or 
be a registered sanitarian, professional 
engineer. or actively certified 
wastewater operator and successful 



<^ 



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NORTH CAROLINA REGISTER 



January 15, 1993 



2316 



PROPOSED RULES 



completion of an approved subsurface 
training school. 
(6) be a private homeowner who intends to 
operate only their own domestic.on-site 
system who has successfully completed 
an approved subsurface training school. 
Provided, however that if an applicant fails the 
Subsurface Systems examination after three at- 
tempts, the applicant must then satisfactorily 
complete a Subsurface Systems approved training 
school before taking the Subsurface Systems 
examination again. 

Statutory Authority G.S. 90A-39: 143B-300. 



hours) with academic preparation in 
chemistry, biology, public health, geol- 
ogy, environmental science, agronomy, 
soils, engineering, or a related field, or 
be an actively certified wastewater 
treatment plant operator and successful 
completion of an approved land applica- 
tion training school. 
Provided, however that if an applicant fails the 
Land Application Systems examination after three 
attempts, the applicant must then satisfactorily 
complete a Land Application Systems approved 
training school before taking the Land Application 
Systems examination again. 



.0211 LAND APPLICATION/RESIDUALS 
OPERATOR 

(a) An applicant for a Land Applica- 
tion/Residuals Operator certificate shall be expect- 
ed to have specific knowledge regarding treatment 
and utilization of residuals and biosolids. The 
applicant should have knowledge of the principals 
of the soil as a treatment system and the proper 
operation of land application systems. The appli- 
cant shall be familiar with the characteristics of 
residuals and biosolids and the proper operation 
and maintenance of the equipment used i_n the land 
application process. The applicant shall also be 
familiar with the laws and regulations governing 
these systems and shall have the ability to make 
appropriate calculations. The applicant shall also 
have the ability to keep and interpret records and 
to complete reports as required by the permit. 

ibi The applicant shall submit an application 
showing that one of the following prerequisite 
combinations of training and experience [s met m 
order to take the Land Application examination. 

( 1 ) three years of acceptable experience in 
a land application operation, and the 
successful completion of an approved 
land application training school: or 

(2) completion of the eighth grade and have 
two years of experience in a land appli- 
cation operation and the successful 
completion of an approved land applica- 
tion training school; or 

(3) be a graduate of high school or have 
earned an equivalent GED and have one 
year of experience i_n a land application 
operation, and successful completion of 
an approved land application training 
school: or 

(4) be a graduate of a two or four year 
college (with a minimum of 900 contact 



Statutory Authority G.S. 90A-39; 143B-300. 

.0212 SPR4Y IRRIGATION OPERVTOR 

(a) An applicant for a Spray Irrigation Operator 
certificate shall be expected to have specific 
knowledge regarding the treatment and spray 
irrigation of wastewater. The applicant should 
have knowledge of the principals of the soil as a 
treatment system and the proper operation of spray 
irrigation systems. The applicant shall be familiar 
with the characteristics of wastewater and the 
proper operation and maintenance of the equipment 
used in the spray irrigation process. The applicant 
must also be familiar with the laws and regulations 
governing these systems and shall have the ability 
to make appropriate calculations. The applicant 
shall also have the ability to keep and interpret 
records and to complete reports as required by the 
permit. 

(b) The applicant shall submit an application 
showing that one of the following prerequisite 
combinations of training and experience has been 
met in order to take the Spray Irrigation examina- 
tion. 

three years of acceptable experience jn 
spray irrigation operation; or 
completion of the eighth grade and have 
two years of experience [n spray irriga- 
tion: or 
(3) be a graduate of high school or have 
earned an equivalent GED and have 
one year of acceptable experience in 
spray irrigation: or 

be a graduate of a two or four year 
college (with a minimum of 900 contact 
hours) with academic preparation i_n 
chemistry 1 . biology, public health, geol- 
ogy, environmental science, agronomy. 
soils, engineering or a related field, or 
be an actively certified wastewater 






L4j 



2317 



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\ORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



treatment plant operator and successful 
completion of an approved spray irriga- 
tion training school; or 
(5) be a private homeowner who intends to 
operate only their own domestic, spray 
irrigation system who has successfully 
completed an approved spray irrigation 
training school. 
Provided, however, that if an applicant fails the 
Spray Irrigation examination after three attempts, 
the applicant must then satisfactorily complete a 
Spray Irrigation approved training school before 
taking the Spray Irrigation examination again. 

Statutory Authority G.S. 90A-39; 143B-300. 

.0213 OPERATOR-IN-TRAINING 

(a) The Commission may allow an applicant for 
the Grade III or IV wastewater treatment plant 
operator certificate or the Grade II] or IV collec- 
tion system operator certificate to take the exami- 
nation at that level, if the individual has met all of 
the prerequisite education and certification require- 
ments but is unable to meet the experience require- 
ment, for the purpose of becoming an 
operator-in-training (PIT). In order to qualify for 
the PIT certificate the applicant may lack a maxi- 
mum of two years of experience that would be 
required to gain full certification at that level. 

(b) Upon successfully passing the examination at 
that level, the applicant will be issued an 
"operator-in-training" certificate for the grade 
applied for. 

(c) The operator-in-training certificate does not 
qualify' the individual to be the PRC of a facility 
of fhe same classification as the PIT certificate. 
The PIT certificate does qualify the individual to 
be the PRC of a facility that is one or more 
classifications below the grade of ffie PIT certifi- 
cate. 

(d) Pperator [n Training certificates must be 
renewed annually hut shall only be valid for a 
period of two years. When the holder of an PIT 
ceil ifi cat e completes the prerequisite experience 
for the standard certificate at that level, the holder 
must submit an application documenting the expe- 
rience, with the appropriate fee for a replacement 
certificate in order to receive the standard certifi- 
cate at that level. 



Statutory Authority G.S. 90A-39; 143B-300. 

.0214 DEFINITIONS 

(a) Acceptable experience shall mean the total 
time spent in a wa s tewater treatment p l ant opera 



tteft water pollution control system operation and 
related fields of which at least 50 percent must be 
actual operating experience in a wa s tewater treat 
ment plant water pollution control system of the 
same type as the certificate being applied for (ie. 
actual experience [n a wastewater treatment system 
is required for applicants for wastewater operators 
certificates, collection systems experience ]s 
required for applicants for collections certificates, 
etc.) 

(b) Recognized college or university shall mean 
an accredited four-year institution awarding de- 
grees on the bachelor's level. 

(c) Recognized two year college or technical 
school shall mean an accredited two-year institu- 
tion awarding degrees on the associate level. 

(d) Related experience shall mean experience jn 
fields related to ffie wastewater field such as: water 
treatment operation and maintenance: wastewater 
maintenance or installation: water or wastewater 
laboratory experience: project engineering involv- 
ing designing, constructing or start-up of treatment 
facilities: collection system operation and mainte- 
nance (for wastewater certification or subsurface 
certification) and inspection of wastewater treat- 
ment facilities. 

(e) Satisfactory or successful completion of an 
approved training school shall mean attendance of 
at least 80 percent of the total hours of instruction 
of a non-degree technical course approved by the 
Wastewater — Treatment — Plant Water Pollution 
Control System Pperators Certification Commis- 
sion. 

(f) Two years of college shall mean a minimum 
of 900 contact hours. 

Statutory- Authority G.S. 90A-39; 143B-300. 

SECTION .0300 - CERTIFICATION BY 
EXAMINATION 

.0301 TIME AND PLACE OF 
EXAMINATION 

The certification commission Certification Com- 
mission or its representatives shall conduct exami- 
nations for certification at the time and place 
hereinafter designated: 
(1) An examination will be given following 
the annual wastewater treatment plant 
operators' school as sponsored by the 
North Carolina Water Control Associa- 
tion and the Wastewater Treatment Plant 
Water Pollution Control System Ppera- 
tors Certification Commission. The date, 
time, and place of examination will be 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2318 



PROPOSED RULES 



determined by the certificat i on commi s 
s+eft Certification Commission . An- 
nouncements of the school and examina- 
tion will be mailed to the owners of all 
wastewater treatment plants and to others 
as deemed appropriate by the certification 
commission Certification Commission . 
Each applicant filing for examination will 
be notified in writing of the date, time , 
and place of the examination and the 
required grade for passing the examina- 
tion. 

(2) Examinations may be administered fol- 
lowing regional wastewater treatment 
plant operator's schools. The examina- 
tion will be scheduled at the same loca- 
tion at which the school is held or at 
another convenient location. Announce- 
ments of the school will be mailed to all 
wastewater treatment plants in the region 
in which the school will be held. In 
addition, the date and time of the exami- 
nation will be announced at the school 
and each applicant will be notified in 
writing of the date, time, and place of the 
examination and the required grade for 
passing the examination. 

(3) Special examinations may be given by the 
commi ss ion Commission at any time or 
place when a sufficient number of appli- 
cations have been filed to justify an 
examination, as determined by the com 
mi ss ion Commission . Each applicant 
filing for examination will be notified in 
writing of the date, time, and place of the 
examination and the required grade for 
passing the examination. 

Statutory Authority G.S. 90A-39; 93B-8; 
143B-300. 

.0302 CONDUCTING AND GRADING 
EXAMINATIONS 

(a) Examinations, prepared by members of the 
commi ss ion Commission or its authorized repre- 
sentatives and approved by the commission Com- 
mission , will be given only to those who, after 
filing proper application, have been determined to 
be eligible. Examinations will be conducted and 
graded under the supervision of a representative of 
the commi ss ion Commission , or its authorized 
representatives. Assistance in conducting and 
grading the examinations may be sought from 
members of the Division of Environmental Man- 
agement, and other appropriate persons with the 



approval of the commission Commission . Exami 
nations will be renumbered; therefore, examinee's 
paper will he identified by number rather than bv 
name. When each examinee receives his examina- 
tion paper, he will identify himself by way of his 
driver's license or other form of identification 
satisfactory to the proctor and the identification 
number will be recorded on the face of the exami- 
nation paper. 

(b) Representatives of the Commission, or other 
authorized representatives, who are supervising the 
examinations may take appropriate action against 
applicants, including dismissal from the examina- 
tion, if cheating does occur. If the applicant holds 
a certificate already, the Commission may revoke 
the certification in accordance with G.S. 90A-41 
and I5A NCAC 8D .0004, for cheating on an 
examination. 



Statutory 
143B-300. 



Authority G.S. 90A-39; 93B-S; 



.0303 EXAMINATION RESULTS AND 
ISSUANCE OF CERTIFICATES 

(a) Within as short a period as feasible, after an 
examination, the examinee will be informed, in 
writing only, by the commission Commission or its 
authorized representatives as to the results of his 
examination. If a passing score is made, such 
notification constitutes certification by the commis 
s+eft Commission that the applicant is a qualified 
operator in the appropriate grade. After each 
examination, a list of those certified shall be drawn 
up and made a part of the permanent records of 
the commi ss ion Commission . Copies of these lists 
will be provided to each commission Commission 
member. Upon completion of the lettering, the 
qualifying applicant will be issued a certificate 
designating his level of competency. 

(b) Under normal circumstances, neither the 
examination grade nor the examination paper of 
any applicant will be made available to anyone 
other than the members of the commi ss ion Com- 
mission and those approved persons who assist in 
conducting and grading the examinations. The 
examination papers will be held for a period of six 
months following notification to the examinee. 
Questions by the applicant concerning the exami- 
nation must be made in writing to the commission 
Commission within that period. An applicant who 
fails to pass an examination shall be entitled to and 
notified of the privilege to review his examination 
in the presence of one or more commission Com- 
mission members or its authorized representative 



2319 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



in the Raleigh office, or upon request, at a region- 
al office of the Department of Environment. 
Health and Natural Resources or other appropriate 
place. 

(c) In order to assure active certification, an 
annual renewal fee will be required as specified in 
G.S. 90A-42. If the renewal fee is not paid for 
three consecutive years, the Commission may 
invalidate the certificate in accordance with 15 A 
NCAC 8D .0004(d). 

Statutory Authority G.S. 90A-39; 90A-40: 90A-42; 
93B-3; 93B-8; 143B-300. 

SECTION .0400 - CERTIFICATION 
WITHOUT EXAMINATION 

.0402 RECIPROCITY CERTIFICATION 

(a) Permanent certificates in the appropriate type 
and grade may be issued without examination to 
individuals listed on the Reciprocity Registry of 
the National Association of Boards of Certifica- 
tion. 

(b) After receipt of application, fee, and proof 
of listing on the Reciprocity Registry of the Na- 
tional Association of Boards of Certification, the 
Certification Commission or its designee may issue 
a permanent certificate in the appropriate type and 
grade if t^4s satisfied that all other conditions for 
certification are met. 

(c) In order to assure active certification, an 
annual renewal fee in the amount specified in G.S. 
90A-42 will be required. 

Statutory Authority G.S. 90A-37; 90A-40ftf); 
90A-42; 143B-300. 

.0404 TEMPORARY CERTIFICATION 

(a) Temporary certification, without examina- 
tion, may be issued by the certification commi ss ion 
Certification Commission at its discretion. Tem- 
porary certificates may be issued with such special 
conditions or requirements relating to the place of 
employment of the person holding the certificate or 
other matters as the commission Commission may 
deem necessary to protect the public health and 
maintain the water quality standards in the receiv- 
ing waters as assigned by the Environmental 
Management Commission. 

(b) Issuance of such temporary certificates shall 
be limited to situations where the supply or avail- 
ability of certified operators is found to be inade- 
quate. Circumstances that will be considered by 
the commission Commission include: 

( 1 ) A certified operator in a lower grade 



level is accumulating experience in 
order to qualify to take examination in 
a higher grade level equal to the classi- 
fication of the facility for which he is 
responsible; 

(2) When an operator has attempted to 
secure permanent certification by taking 
examination and fails; 

(3) An employer had unexpectedly lost a 
certified operator and must secure a 
certified operator in order to comply 
with the General Statutes. 

(c) Application for a temporary certificate must 
be made on an official application blank, obtain- 
able from the commission Commission , and must 
be accompanied by the appropriate certification 
fee. It must also be accompanied by a statement 
signed by the mayor, the city manager, the chair- 
man of the governing board or chief administrative 
officer of the political subdivision or from the 
owner or officer in responsible charge in the case 
of a private utility or industry. Such statement 
shall delineate the reasons why a temporary certifi- 
cate is being requested, shall designate the appli- 
cant as the operator in responsible charge, and 
shall specify plans to acquire permanent certifica- 
tion by examination. The conditions surrounding 
this request will be reviewed by the staff and if all 
conditions are met the Commission or its designee 
may approve the issuance of the temporary certifi- 
cate. If the staff determines that all conditions 
have not been met, the Commission will consider 
the request and will determine if the temporary 
certificate [s to be issued. 

(d) Temporary certificates are valid for one year 
from the date of issuance at the place of employ- 
ment for which they are issued. 

(e) A temporary certificate may only be request- 
ed for "temporary" situations and will be limited 
to the original one year of issuance plus one year 
additional renewal period for one individual. A 
temporary certificate or certificates will be valid at 
any individual wa s tewater treatment plant water 
pollution control system for no more than three 
continuous years from the original date of issu- 
ance. 

(f) If for any reason it becomes necessary for 
the employer to file an application requesting the 
issuance of a second temporary certificate, such 
application must be accompanied by documentation 
of the employer's efforts to employ a properly 
certified operator in addition to all applicable 
requirements for temporary certificate issuance. 

(g) The applicant for a temporary certificate 
must possess the capability to become eligible for 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2320 



PROPOSED RULES 



examination for permanent certification within the 
period of the requested temporary' certificate. 
Upon becoming qualified by reason of experience, 
education and training, he is expected to apply for 
examination and obtain a permanent certificate. 
Failure to attempt permanent certification will be 
reason for not granting renewal. 

(h) If eligible for temporary certification, the 
applicant will be issued a temporary certificate of 
a grade equivalent to the classification of the 
wastewater treatment facility in which the applicant 
is employed. 

Statutory Authority G.S. 90A-40(e): 143B-300. 

.0406 VOLUNTARY CONVERSION TO 
MANDATORY CERTIFICATION 

(a) Individuals who hold certificates of compe- 
tency issued under the voluntary certification 
program for collection system operators adminis- 
tered by the North Carolina Water Pollution 
Control Association may apply for conversion of 
the voluntary certificate to a certificate issued by 
the Certification Commission of the same type and 
grade in accordance with G.S. 90A-40(f). 

(b) Applications for conversion will be made 
a\ ailable to those individuals certified under the 
voluntary certification program. These applica- 
tions must be submitted with the appropriate fee 
for a conversion certificate in accordance with 
G.S. 90A-42 (8). 

Statutory Authority G.S. 9OA-4O0. 

SECTION .0500 - FEES: 
REINSTATEMENT: AND ANNUAL REPORT 

.0502 REFUNDING OF FEES 

Fees or portions thereof as the cert i fication 
commi ss ion Certification Commission deems 
appropriate will be refunded in accordance with 
15A NCAC 8 A .0202 when an applicant is ineligi- 
ble for certification , unable to attend examination. 
or has overpaid. 

Statutory Authority G.S. 90A-42: 143B-300. 

.0506 CONTRACT OPERATORS ANNUAL 
REPORT 

All Contract Operations Firms must file an 
annual report with the Certification Commission [n 
accordance with G.S. 90A-45(e). This report shall 
be on file in the office of the Chairman on or 
before January 15 of each year. This re port shall 
include: 



( 1 ) The name of the company: mailing 
address: phone number; name of the 
owner: and name of the principal contact 
for certification activities: the names and 
permit numbers of the facilities for which 
the company is responsible: the counties 
in which the company operates: the 
certified laboratory used by the company: 
the names of the certified personnel 
employed by the company and their 
certifications: other related services that 
the company wishes to report, and: 

(2) the company's willingness to appear on a 
list of contract operations firms and to 
have this file information available to the 
public. 

Statutory Authority G.S. 90A-45(c). 



2321 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



SUBCHAPTER 8C - CLASSIFICATION OF WATER POLLUTION CONTROL SYSTEMS 

.0002 RATING SCALE FOR CLASSIFICATION OF WASTEWATER TREATMENT FACILITIES 

(a) In-plant processes and related control equipment which are an integral part of industrial production shall 
not be considered waste treatment for the purpose of this Section. Likewise, discharges of wastewater from 
r es idences having a design flow of 1.000 gpd or less, shall not be s ubject to the provi s ions of this Section. 
Facilities consisting of a septic tank and subsurface disposal field without a pump or other appurtenances will 
not be subject to the provisions of this Section. Pretreatment systems prior to subsurface treatment and 
disposal systems in excess of septic tanks, pump tanks, siphon or pump-dosing systems, sand filters, grease 
traps and grease interceptors, and oil/water separators shall be rated according to this Section. Pretreatment 
systems prior to spray irrigation of wastewater in excess of preliminary treatment, lagoons, septic tanks, pump 
tanks, pumps, sand filters, grease trap or grease interceptors, oil/water separators, disinfection and chemical 
addition for nutrient or algae control, shall be rated according to this Section. 

(b) The following scale is used for rating wastewater treatment facilities: 



ITEM POINTS 

(1) Industrial Pretreatment Units and/or or Industrial Pretreatment 

Program (see definition No. 33) 4 

(2) DESIGN FLOW OF PLANT IN gpd [not applicable to non-contaminated 
cooling waters, sludge handling facilities for water purification 

plants, totally closed cycle systems(def-r see definition No. 1 1), 

and facilities consisting only of Item (4)(d) or Items (4)(d) and (1 l)(d)] 

- 20,000 1 

20,001 - 50,000 2 

50,001 - 100,000 3 

100,001 - 250,000 4 

250,001 - 500,000 5 

500,001 - 1 ,000,000 8 

1,000,001 - 2,000,00010 

2,000,001 (and up) rate 1 point additional for each 200,000 gpd 

capacity up to a maximum of 30 

Design Flow (gpd) 

(3) PRELIMINARY UNITS /PROCESSES (see definition No, 32) 

(A) Bar screens 1 

or 

(B) Mechanical Screens, Static Screens or Comminuting Devices 2 

(C) Grit Removal 1 

or 

(D) Mechanical or Aerated Grit Removal 2 

(E) Flow Measuring Device 1 

or 

(F) Instrumented Flow Measurement 2 

(G) Preaeration 2 

(H) Influent Flow Equalization 2 

(I) Grease or Oil Separators - Gravity 2 

Mechanical 3 

Dissolved Air Flotation 8 

(J) Prechlorination 5 

(4) PRIMARY TREATMENT UNITS /PROCESSES 

(A) Septic Tank (see definition Her No. 43) 2 

(B) Imhoff Tank 5 

(C) Primary Clarifiers 5 

(D) Settling Ponds or Settling Tanks for Inorganic Non-toxic Materials 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2322 



PROPOSED RULES 



(sludge handling facilities for water purification plants, sand, gravel. 

stone, and other mining operations except recreational activities 

such as gem or gold mining) 2 

(5) SECONDARY TREATMENT UNITS /PROCESSES 

(A) Carbonaceous Stage 

(i) Aeration-High Purity Oxygen System 20 

Diffused Air System 10 

Mechanical Air System (fixed, floating or rotor) 8 

Separate Sludge Reaeration 3 

(ii) Trickling Stef Filter -High Rate 7 

Standard Rate 5 

Packed Tower 5 

(iii) Biological Aerated Filter or Aerated Biological Filter 10 

(iv) Aerated Lagoons 10 

(v) Rotating Biological Contactors 10 

(vi) Sand Filters - intermittent biological 2 

Recirculating biological 3 

(vii) Stabilization Lagoons 5 

(viii) Clarifier 5 

(ix) Single stage system for combined carbonaceous removal 

of BOD and nitrogenous removal by nitrification (see de-f-7 definition 
No. 12) (Points for this item have to be in addition to 

items (5)(a)(i) through (5)(a)(viii) 87 

(x) Nutrient additions to enhance BOD removal 5 

(xi) Biological Culture ("Super Bugs" (addition 5 

(B) Nitrogenous Stage 

(i) Aeration - High Purity Oxygen System 20 

Diffused Air System 10 

Mechanical Air System (fixed, floating or rotor) 8 

Separate Sludge Reaeration 3 

(ii) Trickling Filter-High Rate 7 

Standard Rate 5 

Packed Tower 5 

(iii) Biological Aerated Filter or Aerated Biological Filter 10 

(iv) Rotating Biological Contactors 10 

(v) Sand Filter - intermittent biological 2 

Recirculating biological 3 

(vi) Clarifier 5 

(6) TERTIARY OR ADVANCED TREATMENT UNITS /PROCESSES 

(A) Activated Carbon Beds - 

without carbon regeneration 5 

with carbon regeneration 15 

(B) Powdered or Granular Activated Carbon Feed- 
without carbon regeneration 5 

with carbon regeneration 15 

(C) Air stripping 5 

(D) Denitrification Process 10 

(El Electrodialysis 5 

(F) Foam Separation 5 

(G) Ion Exchange 5 

(Hi Land Application of Treated Effluent (see definition n^r No. 22b) 

(not applicable for sand, gravel, stone and other similar mining 

operations ) by high rate infiltration 4 

fi-) on agriculturally managed s ite s (See Def. No. 4 ) +0 

<+H bv high rate infiltration on non agrieulturallv managed sites 



2323 7:20 NORTH CAROLINA REGISTER Januarx 15, 1993 



PROPOSED RULES 



(includes rotary di s tributors and similar fixed nozzle systems) 4 

{«i) — by subsurface disposal (includes low pressure pipe systems 
and gravity s ystems except at plants consisting of s eptic tank 

and nitrification line s only) 4 

(I) Microscreens 5 

(J) Phosphorous Removal by Biological Processes ( Sec def . See definition No. 26) . . 20 

(K) Polishing Ponds - without aeration 2 

with aeration 5 

(L) Post Aeration - cascade 

diffused or mechanical 52 

(M) Reverse Osmosis 5 

(N) Sand or Mixed-Media Filters - low rate 2 

high rate 5 

(0) Treatment processes for removal of metal or cyanide 15 

(P) treatment processes for removal of toxic materials other than metal or cyanide . . 15 

(7) SLUDGE TREATMENT 

(A) Sludge Digestion Tank - Heated 10 

Aerobic 5 

Unheated 3 

(B) Sludge Stabilization (chemical or thermal) 5 

(C) Sludge Drying Beds - Gravity 2 

Vacuum Assisted 5 

(D) Sludge Elutriation 5 

(E) Sludge Conditioner (chemical or thermal) 5 

(F) Sludge Thickener (gravity) 5 

(G) Dissolved Air Flotation Unit [not applicable to a unit rated as (3)(i)] 8 

(H) Sludge Gas Utilization (including gas storage) 2 

(1) Sludge Holding Tank - Aerated 5 

Non-aerated 2 

(J) Sludge Incinerator (not including activated carbon regeneration) 10 

(K) Vacuum Filter, Centrifuge, or Filter Press or other similar dewatering devices . . 10 

(8) SLUDGE RESIDUALS UTILIZATION/ DISPOSAL (including incinerated ash) 

(A) Lagoons 2 

(B) Land Application (surface and subsurface) (see definition 22a) 

where the facility hold the land application permit 40 

by contracting to a land application operator or landfill operator 

who holds the land application permit or landfill permit 2 

land application of sludge by a contractor who docs not hold 

the permit for the wa s tewater treatment facility where the sludge is generated . . . -W 

(C) Dedicated Landfilled (burial) by the permittee of the wastewater treatment facility . 5 

(9) DISINFECTION 

(A) Chlorination 5 

(B) Dechlorination 5 

(C) Ozone 5 

(D) Radiation 5 

(10) CHEMICAL ADDITION SYSTEM(S) (See see definition No. 9) 

[not applicable to chemical additions rated as Item (3)(j), (5)(a)(xi), (6)(a), 

(6)(b), (7)(b), (7)(e), (9a), (9)(b) or (9)(c) 5 points each: 

List 5 

5 

5 

5 

(11) MISCELLANEOUS UNITS /PROCESSES 

(A) Holding Ponds, Holding Tanks or Settling Ponds for Organic 
or Toxic Materials including wastes from mining operations 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2324 



PROPOSED RULES 



containing nitrogen and/or or phosphorus compounds in 

amounts significantly greater than is common for domestic wastewater 4 

(B) Effluent Flow Equalization (not applicable to storage basins which 

are inherent in land application systems) 2 

(C) Stage Discharge (not applicable to storage basins inherent 

in land application systems) 5 

(D) Pumps 3 

(E) Stand-By Power Supply 3 

(F) Thermal Pollution Control Device 3 

TOTAL POINTS 

CLASSIFICATION 

Class I 5-25 Points 

Class II 26-50 Points 

Class III 51-65 Points 

Class IV 66-Up Points 

Facilities having a rating of one through four points, inclusive, do not require a certified operator. 
Classification of all other facilities requires a comparable grade operator in responsible charge. 

The following systems shall be assigned a Class I classification, unless the flow js of a significant quantity or 
the technology is unusually complex, to require consideration by the Commission on a case-by-case basis: 

Oil/water Separator Systems consisting only of physical separation, pumps and disposal: 

Septic Tank/Sand Filter Systems consisting only of septic tanks, dosing apparatus, pumps, sand filters. 

disinfection and disposal: 

Lagoon Systems consisting only of preliminary' treatment, lagoons, pumps, disinfection, necessary 

chemical treatment for algae or nutrient control, and discharge: 

Closed-loop Recycle Systems; 

Groundwater Remediation Systems consisting only of pumps, air-stripping, carbon adsorption- 
disinfection and disposal; 

Fish farms with discharge to surface waters; 

Water Plant sludge handling and back-wash water treatment: 



Seafood processing consisting of screening and disposal. 

Single-family discharging systems with the exception of Aerobic Treatment Units 

Facilities having an activated sludge process will be assigned a minimum classification of Class II. 
Facilities having treatment processes for the removal of metal or cyanide will be assigned a minimum 
classification of Class II. 

Facilities having treatment processes for the biological removal of phosphorus will be assigned a minimum 
classification of Class III. 

Any units or processed not included in the rating system will be assigned a point value by the Commission 
on a case-by-case basis. 

Statutory Authority G.S. 90A-37. 

method will have a flow rate varying 

.0004 DEFINITIONS from two to eight gallons per minute per 

The following definitions shall apply throughout square foot and may be either upflow or 

this Subchapter. downflow carbon beds. Carbon may or 

(1) Activated Carbon Beds. A physi- may not be regenerated on the 

cal chemical method for reducing soluble wastewater treatment plant site; 

organic material from wastewater efflu- (2) Aerated Lagoons. A basin in which all 

ent; The column-type beds used in this solids are maintained in suspension and 



2325 7:20 NORTH CAROLINA REGISTER January 15, 1993 



PROPOSED RULES 



by which biological oxidation or organic 
matter is reduced through artificially 
accelerated transfer of oxygen on a 
flow-through basis; 

(3) Aeration. A process of bringing about 
intimate contact between air or high 
purity oxygen in a liquid by spraying, 
agitation or diffusion; 

(4) Agriculturally managed site. Any site on 
which a crop is produced, managed, and 
harvested (Crop includes grasses, grains, 
trees, etc.); 

(5) Air Stripping. A process by which the 
ammonium ion is first converted to dis- 
solved ammonia (pH adjustment) with the 
ammonia then released to the atmosphere 
by physical means; or other similar pro- 
cesses which remove petroleum products 
such as benzene, toluene, and xylene; 

(6) Carbon Regeneration. The regeneration 
of exhausted carbon by the use of a 
furnace to provide extremely high tem- 
peratures which volatilize and oxidize the 
absorbed impurities; 

(7) Carbonaceous Stage. A stage of 
wastewater treatment designed to achieve 
"secondary" effluent limits; 

(8) Centrifuge. A mechanical device in 
which centrifugal force is used to sepa- 
rate solids from liquids and/or or to 
separate liquids of different densities; 

(9) Chemical Addition Systems- The addition 
of chemical(s) to wastewater at an appli- 
cation point for purposes of improving 
solids removal, pH adjustment, alkalinity 
control, etc.; the capability to experiment 
with different chemicals and different 
application points to achieve a specific 
result will be considered one system; the 
capability to add chemical(s) to dual units 
will be rated as one system; capability to 
add a chemical at a different application 
points for different purposes will result in 
the systems being rated as separate sys- 
tems; 

(10) Chemical Sludge Conditioning. The 
addition of a chemical compound such as 
lime, ferric chloride, or a polymer to wet 
sludge to coalesce the mass prior to its 
application to a dewatering device; 

(11) Closed Cycle Systems. Use of holding 
ponds or holding tanks for containment 
of wastewater containing inorganic, 
non-toxic materials from sand, gravel, 
crushed stone or other similar operations. 



from which there ia no discharge to the 
s urface water s ; Such systems shall carry 
a maximum of two points regardless of 
pumping facilities or any other appurte- 
nances; 

(12) Combined Removal of Carbonaceous 
BOD and Nitrogenous Removal by 
Nitrification- A single stage system ^de- 
s igned" required to achieve "advanced" 
permit effluent limits on BOD and ammo- 
nia nitrogen within the same biological 
reactor; 

(13) Be chlorination Dechlorination . The 
partial or complete reduction of residual 
chlorine in a liquid by any chemical or 
physical process; 

(14) Denitrification Process. The conversion 
of nitrate-nitrogen to nitrogen gas; 

(15) Electrodialysis. Process for removing 
ionized salts from water through the use 
of ion-selective ion-exchange membranes; 

( 16) Filter Press. A process operated mechan- 
ically for partially dewatering sludge; 

(17) Foam Separation. The planned frothing 
of wastewater or wastewater effluent as a 
means of removing excessive amounts of 
detergent materials through the introduc- 
tion of air in the form of fine bubbles; 
also called foam fractionation; 
Grit Removal. The process of removing 
grit and other heavy mineral matter from 
wastewater; 

Imhoff Tank. A deep two story 
wastewater tank consisting of an upper 
sedimentation chamber and a lower 
sludge digestion chamber. 
Instrumented Flow Measurement. A 
device which indicates and/or and records 
rate of flow; 

Ion Exchange. A chemical process in 
which ions from two different molecules 
are exchanged; 
Land application; 

Sludge Disposal. A final sludge dispos- 
al method by which wet sludge may be 
applied to land either by spraying on 
the surface or by subsurface injection 
(i.e., chisel plow); [not applicable for 
types of sludge described in (11) of this 
Rule]; 
(b) Treated Effluent. The process of spray- 
ing treated wastewater onto a land area 
or other methods of application of 
wastewater onto a land area as a means 
of final disposal and/or or treatment; 



(18) 



(19) 



(20) 



(21) 



(22) 
(a) 



7:20 



NORTH CAROLINA REGISTER 



January IS, 1993 



2326 



PROPOSED RULES 



(23) Microscreen. A low speed, continuously 
back-washed, rotating drum filter operat- 
ing under gravity conditions as a polish- 
ing method for removing suspended 
solids from effluent; 

(24) Nitrification Process. The biochemical (b) 
conversion of unoxidized nitrogen (am- 
monia and organic nitrogen) to oxidized 

nitrogen (usually nitrate); 

(25) Nitrogenous Stage. A separate stage of (34) 
wastewater treatment designed for the 

specific purpose of converting ammonia 
nitrogen to nitrate nitrogen; 

(26) Phosphate Removal, Biological. The 
removal of phosphorus from wastewater 

by an oxic/anoxic process designed to (35) 

enhance luxury uptake of phosphorus by 

the microorganisms; (36) 

(27) Polishing Pond. A holding pond follow- 
ing secondary treatment with sufficient 

detention time to allow settling of finely (37) 

suspended solids; 

(28) Post Aeration. Aeration following con- 
ventional secondary treatment units to 
increase effluent D.O. or for any other 

purpose; (38) 

(29) Post Aeration. (Cascade) A polishing 
method by which dissolved oxygen is 
added to the effluent by a nonmechanical, 
gravity means of flowing down a series 

of steps or weirs; The flow occurring (39) 

across the steps or weirs moves in a (a) 

fairly thin layer and the operation of the 

cascade requires no operator adjustment; 

thus, zero points are assigned even 

though this is an essential step to meeting 

the limits of the discharge permit; 

(30) Powdered to Granular Activated Carbon 
Feed. A biophysical carbon process that 

utilizes biological activity and organic (b) 

absorption by using powdered or granular 
activated carbon; Virgin and/or or re- 
generated carbon is feed controlled into 
the system; 

(31) Preaeration. A tank constructed to pro- (40) 
vide aeration prior to primary treatment; 

(32) Preliminary Units. Unit operations in the 
treatment process, such as screening and 
comminution, that prepare the liquor for (a) 
subsequent major operations; 

(33) Industrial Pretreatment. 

(a) Pre-treatment Unit, Industrial. The (b) 

conditioning of a waste at its source 
before discharge, to remove or to neu- 
tralize substances injurious to sewers 



and treatment processes or to effect a 
partial reduction in load on the treat- 
ment process which is operated by the 
same governing body as the wastewater 
treatment plant being rated; 
Pre-treatment Program. Industrial - 
must be a State or EPA required pro- 
gram to receive points on the rating 
sheet; 
Primary Clarifiers. The first settling 
tanks through which wastewater is passed 
in a treatment works for the purpose of 
removing settleable and suspended solids 
and BOD which is associated with the 
solids; 

Pumps. All influent, effluent and 
in-plant pumps; 

Radiation. Disinfection and/or or steril- 
ization process utilizing devices emitting 
ultraviolet or gamma rays; 
Reverse Osmosis. A treatment process in 
which a heavy contaminated liquid is 
pressurized through a membrane forming 
nearly pure liquid free from suspended 
solids; 

Rotating Biological Contractors. A fixed 
biological growth process in which 
wastewater flows through tanks in which 
a series of partially submerged circular 
surfaces are rotated; 
Sand Filters: 
Intermittent Biological. Filtration of 
effluent following septic tanks, lagoons, 
or some other treatment process in 
which further biodecomposition is 
expected to produce desired effluents; 
Hydraulic loading rates on these filters 
are computed in gpd/ac and have a 
resulting low gpm/sf (less than one); 
Recirculating biological - the same type 
of sand filter as defined in Subpara- 
graph (39) (a) of this Rule with the 
added capability to recycle effluent 
back through the sand filter; 
Sand or Mixed-Media Filters. A polish- 
ing process by which effluent limits are 
achieved through a further reduction of 
suspended solids; 
low rate — gravity, hydraulically loaded 
filter with loading rates in the one to 
three gpm/sf range; 
high rate — a pressure, hydraulically 
loaded filter with loading rates in the 
five gpm/sf range; At any rate, the 
loading rate will exceed three gpm/sf; 



2327 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



(41) Secondary Clarifiers. A tank which (50) 
follows the biological unit of treatment 

plant and which has the purpose of re- 
moving sludges associated with the bio- 
logical treatment units; 

(42) Separate Sludge Reaeration. A part of 

the contact stabilization process where (51) 

the activated sludge is transferred to a 
tank and aerated before returning it to the 
contact basin; 

(43) Septic Tank. A single-story settling tank (52) 
in which settled sludge is in contact with 

the wastewater flowing through the tank; 

shall not be applicable for septic tank 

systems serving single family residences 

having capacity of 2,000 gallons or less (53) 

which discharge to a nitrification field; 

(44) Sludge Digestion. The process by which (54) 
organic or volatile matter and sludge is 

gasified, liquefied, mineralized or con- 
verted into more stable organic matter 
through the activity of living organisms, 
which includes aerated holding tanks; 

(45) Sludge Drying Beds. An area comprising (55) 
natural or artificial layers of porous 

materials upon which digested sewage 
sludge is dried by drainage and evapora- 
tion; 

(46) Sludge Elutriation. A process of sludge (56) 
conditioning in which certain constituents 

are removed by successive washings with 
fresh water or plant effluent; 

(47) Sludge Gas Utilization. The process of 
using sewage gas for the purpose of 

heating buildings, driving engines, etc.; (57) 

(48) Sludge Holding Tank (Aerated and 
Nonaerated). A tank utilized for small 
wastewater treatment plants not contain- 
ing a digester in which sludge may be 
kept fresh, and supernatant withdrawn 
prior to a drying method (i.e. sludge 

drying beds); This may be done by add- (58) 

ing a small amount of air simply to keep 

the sludge fresh, but not necessarily an 

amount that would be required to achieve 

stabilization of organic matter. A 

nonaerated tank would simply be used to 

decant sludge prior to dewatering and 

would not allow long periods (several 

days of detention) without resulting odor 

problems; 

(49) Sludge Incinerators. A furnace designed 
to burn sludge and to remove all moisture 
and combustible materials and reduce the 
sludge to a sterile ash; 



Sludge Stabilization (Chemical or Ther- 
mal). A process to make treated sludge 
less odorous and putrescible, and to 
reduce the pathogenic organism content; 
This may be done by pH adjustment, 
chlorine dosing, or by heat treatment; 
Sludge Thickener. A type of sedimenta- 
tion tank in which the sludge is permitted 
to settle and thicken through agitation and 
gravity; 

Stabilization Lagoon. A type of oxida- 
tion lagoon in which biological oxidation 
of organic matter is effected by natural 
transfer of oxygen to the water from air 
(not a polishing pond); 
Stand-By Power Supply. On site or 
portable electrical generating equipment; 
Static Screens. A stationary screen de- 
signed to remove solids, including 
non-biodegradable particulate (floatable 
solids, suspended solids and BOD reduc- 
tion) from municipal and industrial 
wastewater treatment systems; 
Tertiary Treatment. A stage of treatment 
following secondary which is primarily 
for the purpose of effluent polishing; A 
settling lagoon or sand or coal filter 
might be employed for this purpose; 
Thermal Pollution Control Device. A 
device providing for the transfer of heat 
from a fluid flowing in tubes to another 
fluid outside the tubes, or vice versa; or 
other means of regulating liquid tempera- 
tures; 

Thermal Sludge Conditioner. A condi- 
tioning process by which heat is added 
for a protracted period of time to im- 
prove the dewaterability of sludge by the 
solubilizing and hydraulizing of the 
smaller and more highly hydrated sludge 
particles; 

Toxic Materials. Those wastes or combi- 
nations of wastes, including 
disease-causing agents which after dis- 
charge and upon exposure, ingestion, 
inhalation or assimilation into any organ- 
ism, either directly from the environment 
or indirectly by ingestion through food 
chains, will cause death, disease, behav- 
ioral abnormalities, cancer, genetic muta- 
tions, physiological malfunctions (includ- 
ing malfunctions in reproduction) or 
physical deformations, in such organisms 
or their offspring; Toxic materials in- 
clude, by way of illustration and not 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2328 



PROPOSED RULES 



limitation: lead, cadmium, chromium, 
mercury. vanadium. arsenic. zinc, 
ortho-nitro-chloro benzene (ONCB). 
polychlorinated biphenyls (PCBs) and 
dichlorodiphenyl trichloroethane (DDT): 
and any other materials that have or may 
hereafter be determined to have toxic 
properties; 

(59) Trickling Filter. A biological treatment 
unit consisting of a material such as 
broken stone or rock over which 
wastewater is distributed; A high rate 
trickling filter is one which operated at 
between 10 and 30 mgd per acre. A low 
rate trickling filter is one which is de- 
signed to operate at one to four mgd per 
acre; 

(60) Trickling Filter (Packed Tower). A plug 
flow type of operation in which 
wastewater flows down through succes- 
sive layers of media or filtrate material; 
Organic material is removed continually 
by the active biological fixed growth in 
each successive layer. This method may 
produce "secondary" quality effluent, or 
may be adapted to produce a nitrified 
effluent; 

(61) Vacuum Filter. Centrifuges, or Filter 
Presses. Devices which are designed to 
remove excess water from either digested 
or undigested sludge prior to disposal or 
further treatment. 

Statutory Authority G.S. 90A-37. 

.0005 CLASSIFICATION OF SUBSURFACE 
TREATMENT AND DISPOSAL 
SYSTEMS 

Facilities which utilize the subsurface treatment 
and disposal of wastewater shall be classified as 
subsurface systems. All subsurface systems 
permitted under rules adopted by the Environmen- 
tal Management Commission and those subsurface 
systems permitted under rules adopted by the 
Commission for Health Services, which require a 
certified operator as specified in 15A NCAC 18A 
. 1961 . shall be operated by and operator in re- 
sponsible charge who poss esses a certi ficate in 
subsurface system operation. Conventional septic 
tank systems, consisting of only a septic tank and 
nitrification field without pumps or other appurte- 
nances, will not be subject to the provisions of this 
Section. If the subsurface system consists of septic 
tanks, pump tanks, siphon or pump dosing sys- 
tems, sand filters, grease traps or grease intercep- 



tors, or oil/ water separators and subsurface dispos- 
al of the wastewater, no additional wastewater 
treatment classification will be required. 
Wastewater treatment in excess of these compo- 
nents will be subject to rating as a wastewater 
treatment facility under .0002 (b) of this Section. 
All systems that are required to have only a certi- 
fied subsurface operator under 15A NCAC 18A 
.1961 shall be deemed classified as subsurface 
systems. Any system that has a wastewater treat- 
ment plant, classified under 15A NCAC 8C .0002. 
will receive notification of the classification from 
the Commission. 

Statutory- Authority- G.S. 90A-37. 

.0006 CLASSIFICATION OF LAND 
APPLICATION SYSTEMS 

Facilities permitted for the land application of 
sludge, residuals, biosolids or contaminated soil 
(on a designated site), shall be classified as land 
application systems and will be required to have an 
operator in responsible charge who possesses a 
certificate in land application /residuals operation. 

Statutory- Authority G.S. 90A-37. 

.0007 CLASSIFICATION OF COLLECTION 
SYSTEMS 

Collection systems that are operated jn conjunc- 
tion with wastewater treatment facilities permitted 
to municipalities, regional facilities or water and 
sewer authorities, public utilities, state-owned 
facilities that are Class III or Class IV and federal- 



ly owned facilities that are Class II. Class III or 
Class IV will be subject to rating as a collection 
system. Any collection system, regardless of 
ownership, may be classified as a collection system 
and will be required to designate an operator in 
responsible charge, in the event that the Commis- 
sion or its designees identify the failure to properly 
operate or maintain the system. The following 
rating system will be used to determine the classi- 
fication of collection systems. 
( 1 ) the collection system will be assigned the 
same classification as the current rating 
of the wastewater treatment facility to 
which the collection system is tributary: 



(2) 



or 

the collection system will be assigned the 
classification based on the population 
served by the collection system as fol- 
lows, whichever would provide the lower 
classification: in the event that the popu- 
lation served cannot be determined, the 



2329 



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January 15, 1993 



PROPOSED RULES 



equivalent population served will be 
calculated, using the design flow of the 
treatment plant and a flow of 95 gallons 
per day per person. 

Population of 1500 or less Class I 

Population of 1501-15,000 Class II 

Population of 15.001-50,000 Class III 
Population of 50,000 or more Class IV 
(3) Upon classification, the Commission may 
establish a date, by which, the permittee 
must designate an operator of the appro- 
priate grade to operate the collection 
system. 

Statutory Authority G.S. 90A-37. 

.0008 CLASSIFICATION OF SPRAY 
IRRIGATION SYSTEMS 

Facilities which utilize the spray irrigation of 
wastewater shall be classified as spray irrigation 
systems. If the spray irrigation system consists 
only of preliminary treatment, lagoons, septic 
tanks, pump tanks, pumps, grease traps or grease 
interceptors, oil/water separators, sand filters, 
disinfection, and chemical treatment for nutrient or 
algae control and the spray irrigation of the 
wastewater, no additional wastewater treatment 
classification will be required. Wastewater treat- 
ment in excess of these components, will be 
subject to rating under Rule .0002 (b) of this 
Section. 

Statutory Authority- G.S. 90A-37. 

SUBCHAPTER 8D - POWERS AND 
ENFORCEMENT 

.0002 CLASSIFICATION OF WATER 

POLLUTION CONTROL SYSTEMS 

The certification commission Certification Com- 



mission shall classify wastewater treatment facili 
ties water pollution control systems in accordance 
with the rating scale system set out in Subchapter 
8C of this Title. 



commission's Commission's taking action on a 
proposed revocation or suspension, the operator 
shall be given an opportunity to submit a written 
statement and present oral argument before the 
commission Commission at a regularly scheduled 
meeting. Notice of the meeting shall be delivered 
personally or by certified mail at least 15 days 
prior to the meeting. 

(b) Notice of the revocation or suspension shall 
be delivered to the operator personally or by 
certified mail at least 20 days prior to the effective 
date of the revocation or suspension . The notice 
shall contain the alleged facts or conduct upon 
which the revocation or suspension is based and 
shall inform the operator of the opportunity to 
contest the action. The procedures to be followed 
shall be as specified in 15A NCAC 8 A .0302. 

(c) Certification may be relinquished by submis- 
sion to the Certification Commission of the origi- 
nal certificate and a notarized statement of relin- 
quishment. 

(d) The Certification Commission may invalidate 
the certification of an operator for nonpayment of 
the annual renewal fee in accordance with G.S. 
90A-40. Notice of this action shall be delivered 
by certified mail or personal service at least 30 
days prior to the effective date of the invalidation. 
If the appropriate renewal fees and the required 
late fees are received within this period, the 
certificate will remain active. In order for a 
certificate to be revalidated, the appropriate renew- 
al fees and late fees must be paid. 

(e) The Certification Commission may issue a 
written reprimand to an operator jn accordance 
with G.S. 90A-40. The reprimand shall be deliv- 
ered personally or by certified mail. A copy of 
the letter will be kept [n the operator's file and a 
copy will be sent to the operator's employer. The 
operator will be given the opportunity to pjrt a 
letter of rebuttal into the file when a reprimand has 
been issued. 



Statutory Authority- G.S. 90A-41 ; 
150B-3; 150B-23; 150B-38; 150B-52. 



143B-300; 



Statutory- Authority G.S. 90A-35; 90A-37, 90A-43; 
90A-44; 150B-23. 

.0004 REVOCATION, RELLNQUISHMENT 
OR LNVALIDATION OF 
CERTIFICATION 

(a) The certification commission Certification 
Commission may revoke or suspend the certifica- 
tion of an operator in accordance with the provi- 
sions of NCGS G.S. 90A-41. Prior to the 



.0005 NOTIFICATION TO 

ENVIRONMENTAL MANAGEMENT 
COMMISSION 

The commi ss ion Commission shall notify the 
Environmental Management Commission of the 
failure of an owner of a wastewater treatment 
facility water pollution control system to provide 
a certified operator or of the revocation or relin- 
quishment of the certificate of any operator. 



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January 15, 1993 



2330 



PROPOSED RULES 



Statutory Authority G.S. 
143B-300. 



90A-35; 90A-43; 



.0006 RECERTIFICATION FOLLOWING 
REVOCATION OR 
RELINQUISHMENT 

(a) After revocation or relinquishment has been 
effective for a period of not less than 270 days, a 
person may apply in writing for recertification by 
the commission Commission , including in his 
petition any relevant facts concerning changes to 
conditions under which revocation or relinquish- 
ment occurred. Such facts should show clearly 
that applicant will comply with the laws and 
regulations. 

(b) Within 120 days following receipt of an 
application for recertification. the commission 
Commission will notify the applicant by letter of 
its decision to deny or grant examination eligibility 
in accordance with procedures set out at subsection 
8B .0102 herein, in L5A NCAC 8B .0102. Addi- 
tional eligibility requirements including a show 
cause conference may be imposed by the oommis 
skm Commission as it deems appropriate. Eligi- 
bility will only be granted if there is substantial 
evidence that the conditions leading to the revoca- 
tion or relinquishment have been corrected. 

(c) Recertification of a person as a wastewater 
treatment plant operator shall only occur by means 
of application and examination. The examinations 
will not be waived. The applicant shall meet the 
eligibility requirements set forth in Section 
8B.0200 beginning with 8B .0201 except that 
applicant shall not be eligible for 8B .0206. 
Operational experience prior to revocation or 
relinquishment will not apply as eligibility for 
future recertification. Applicant shall not be 
eligible for temporary certification under Section 
8B .0404. 

(d) Upon notification of the commission's 
Commission's decision to deny eligibility, the 
applicant may appeal the decision pursuant to the 
procedures contained in Article 3A of Chapter 
150B of the General Statutes. 

Statutory Authority G.S. 90A-39; 150B-3; 
150B-38. 

TITLE 21 - OCCUPATIONAL 
LICENSING BOARDS 

1\ otice is hereby given in accordance with G.S. 
150B-21.2 that the N.C. State Board of Cosmetic 
Art Examiners intends to amend rules cited as 21 



NCAC 14A .0101. 

1 he proposed effective date of this action is April 
1, 1993. 

1 he public hearing will be conducted at 10:00 
a.m. on February 15. 1993 at the Grove Towers. 
5th Floor. 1110 Navaho Drive. Raleigh. N.C. 
27609. 

MXeason for Proposed Action: Die reason for this 
proposed action is to define rental cosmetology 
booths. 

Ksomment Procedures: Die record shall be open 
for 30 days to receive written and oral comments. 
Written conunents should be received by the N. C. 
State Board of Cosmetic Art Examiners by Febru- 
ary 10. 1993. and requests to speak must be in 
writing and received by February 8, 1993 prior to 
hearing, to be considered as part of the hearing 
record. Conunents should be addressed to Vickv 
R. Goudie. Executive Secretary, N. C. State Board 
of Cosmetic Art Examiners, 1110 Navaho Dr., 
Raleigh, N.C. 27609. Speaking time 5 minutes. 

CHAPTER 14 - BOARD OF COSMETIC 
ART EXAMINERS 

SUBCHAPTER 14A - DEPARTMENTAL 
RULES 

SECTION .0100 - ORGANIZATIONAL 
RULES 

.0101 DEFINITIONS 

The following definitions apply in this Chapter: 

( 1 ) "Beauty Establishment" refers to both 
cosmetic art schools and cosmetic art 
shops. 

(2) "Board" refers to the North Carolina 
State Board of Cosmetic Art Examin- 
ers. 

(3) "Cosmetic Art School" refers to any 
place where cosmetic art, as defined by 
G.S. 88-2, or methods of teaching 
cosmetic art are taught for purposes of 
licensing by the Board regardless of the 
title of the school or program. 

(4) "Cosmetic Art Shop" refers to any 
building, or part thereof, wherein cos- 
metic art. as defined by G.S. 88-2. is 



2331 



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Januan 15, 1993 



PROPOSED RULES 



practiced, other than a cosmetic art 
school. Any part of a place occupied 
by an independent contractor that rents 
booth space in order to follow cosme- 
tology or any of its practices shall be 
considered a separate "cosmetic art 
shop." 

(5) "Cosmetology School" is any cosmetic 
art school which teaches cosmetology 
as defined by G.S. 88-2, Paragraph 2, 
but is not a manicurist school. 

(6) "Cosmetology Student" is a student in 
any cosmetic art school with the excep- 
tion of a manicurist student. 

(7) "Cosmetology Teacher" is any teacher 
who is licensed by the Board to teach 
the cosmetic arts. 

(8) "Manicuring" is that set of cosmetic 
arts related to the nails, hands, arms 
and feet. It includes traditional mani- 
curing, pedicuring, arm and hand mas- 
sages, and all types of artificial nails. 

(9) "Manicurist School" is a cosmetic art 
school which teaches only the cosmetic 
arts of manicuring. 

(10) "Manicurist Student" is a student in any 
cosmetic art school whose study is 
limited to the manicurist curriculum set 
forth in 21 NCAC 14K .0002. 

(11) "Manicurist Teacher" is a teacher who 
is licensed by the Board to teach only 
the manicuring curriculum. 

(12) "Booth" is a work station within a 
cosmetic art shop which is used primar- 
ily by one cosmetologist or manicurist 
in performing cosmetic art services for 
their clientele. "Booth" does not in- 
clude the reception area, lavatories, 
common hair-drying facilities, common 
shampooing facilities or other areas 
used in common by the cosmetologists 
or manicurists working within a cos- 
metic art shop. 

Statutory Authority G.S. 88-1. 



IVotice is hereby given in accordance with G.S. 
150B-21 .2 that the Board of Examiners of Electri- 
cal Contractors intends to amend rules cited as 21 
NCAC 18B .0104, .0203. .0206. .0306. .0401, 
.0403. .1001. .1003, .1103 and repeal rule cited 
as 21 NCAC 18B .0703. 



1 he proposed effective date of this action is April 
1, 1993. 

1 he public hearing will be conducted at 8:30 
a.m. on February 18. 1993 at the Board's Office 
at 1200 Front Street, Suite 105, Raleigh. NC 
27609. 

MXeason for Proposed Actions: 

21 NCAC 18B .0104 - To update rule with current 
job titles. 

21 NCAC 18B .0203 - To update specifications for 
scope of qualifying examinations and delete obso- 
lete specifications. 

21 NCAC 18B .0206 - To allow flexibility in 
scheduling sites for regular semi-annual examina- 
tions. 

21 NCAC 18B .0306 - To clarify conditions of 
bona fide employee status under G. S. 87-43. 1 (3). 
21 NCAC 18B .0401 - To specify other financial 
information that will be considered by the Board 
pursuant to G.S. 87-43. 2(a)(4). 
21 NCAC 18B .0403 - To clarify that a place of 
business can be issued licenses in different classifi- 
cations where the place of business has one listed 
qualified individual who is qualified in different 
classifications. 

21 NCAC 18B .0703 - Reciprocal Agreement 
terminated effective July 16. 1992. 
21 NCAC 18B .1001 - To update listing of forms 
furnished by the Board. 

21 NCAC 18B .1003 - To update listing of publi- 
cations available from the Board. 
21 NCAC 18B .1103 - To revise minimum require- 
ments for applicants to satisfy to be considered for 
approval as continuing education course instruc- 
tors. 

Ksommcnt Procedures: Interested persons max 
present statements, orally and in writing, at the 
public hearing or in writing prior to the hearing by 
mail to: Board of Examiners of Electrical Contrac- 
tors. P.O. Box 18727. Raleigh, NC 27619, Attn: 
Robert L. Brooks, Jr. 

CHAPTER 18 - BOARD OF EXAMINERS 
OF ELECTRICAL CONTRACTORS 

SUBCHAPTER 18B - BOARDS RULES FOR 

THE IMPLEMENTATION OF THE 

ELECTRICAL CONTRACTING 



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2332 



PROPOSED RULES 



LICENSING ACT 

SECTION .0100 - GENERAL PROVISIONS 

.0104 ALTHORIZED LEGAL ACTION BY 
STAFF 

(a) The following members of the BoarcTs staff 
are authorized to act on behalf of the Board in 
criminal and civil actions brought under the provi- 
sions of G.S. 87-48: 

i 1 i the Board's executive director: 

(2) the Board's field representative - eoordi 
nator: and examinations and field super- 
visor; and 

(3) the Board's field representa- 
tives /investigators . 

(b) These staff members, under the supervision 
of the Board's secretary-treasurer, shall have in 
addition to their other duties as set by the execu- 
tive director. the duty to assist the 
secretary-treasurer in maintaining a registry of all 
licenses issued to electrical contractors. 

(o These staff members are authorized to give 
affidavits, act as plaintiffs, verify complaints, sign 
criminal warrants, testify in court or in other 
proceedings and to perform all other acts as may 
be required in criminal and civil actions. 

Statutory, Authority G.S. 87-40; 87-42: 87-43. 

SECTION .0200 - EXAMINATIONS 

.0203 EXAMLNATION SCOPE 

(a) General. In addition to the examination 
scope specified in G.S. 87-42. qualifying examina- 
tions for each license classifications classification 
shall include the basic North Carolina and federal 
laws and rules applicable to electrical contracting, 
including revenue license requirements and permit 
and inspection requirements. 

(b) Variation in Scope. The examinations for 
each license classification shall be based on a level 
of technical and practical knowledge concerning 
the safe and proper installation of electrical work 
and equipment which is appropriate and corre- 
sponds to the electrical contracting work autho- 
rized under each license classification. 

Statutory Authority G.S. 87-42: 87-43.3: 87-43.4. 

.0206 REGULAR SEMI-ANNUAL 
EXAMINATIONS 

The executive director is authorized to arrange 
for regular semi-annual examinations to be held tn 
the vicinities »f- Raleigh. A s hcvill c ftfld 



Willinm s ton. N.C.. during the months of March 
and September of each year. The Board may 
establish such other examination places and dates 
as it deems necessary. 

Statutory Authority G.S. 87-42: 87-43.3: 87-43.4. 

SECTION .0300 - DEFLNTTIONS AND 

EXPLANATIONS OF TERMS APPLICABLE 

TO LICENSLNG 

.0306 BONA FIDE EMPLOYEE 

(a) For the exemption for electrical work done 
as a bona fide employee of a license under G.S. 
87-43.1(3). the following conditions must be met: 



(1) 



The employing licensee — must hold a 
license i ss ued by the Board. — The re 
s triction s of the licen s e apply to both 
the licensee and any employee of the 
licen s ee. The restrictions of the em- 



ploving licensee's license apply to any 
employee of the licensee. 

(2) Th e work performed by the individual 
must be performed as an employee - of 
the licen s ee during the hours the indi 
vidual i s actually working a s an em 
plovee of the employing licen s ee, and 
must be re s tricted to the s pecific electri 
cnl work which th e individual is doing 
for, and in the name of. the licensee. 
The employing licensee shall have 
control and direction of the details- 
methods and manner of performing the 
electrical work being done by the em- 
ployee. The manner of payment, if 
any, to the person shall not be the sole 
det ermining factor concerning whether 
the person is an employee. 

(3) The individual must receive eompen s a 
tion from the employing licen s ee that is 
reasonable related to the hour s worked 
or the work accomplished by the indi 
vidual for the licen s ee. The electrical 
work shall be performed under the 
supervision and direction of a listed 
qualified individual who js the employ- 
ing licensee, or under the supervision 
and direction of a listed qualified indi- 
vidual regularly employed by the em- 
ploying licensee. 

f4-) The — related — compen s ation — must — be 

reported by the employing licensee to 
the federal and s tate tax authoritie s as 
earnings of the individual employee, 
with appropriate deductions taken and 



2333 



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January 15, 1993 



PROPOSED RULES 



reported — fer- — withholding — taxe s — and 
FICA contributions. 

{§} Consistent — w+th — applicable — l aw s , — the 

individual employee mu s t be covered 
by the employing licensee's workers' 
compensation insurance. 

(b) G.S. 87 4 3 and G.S. 87 4 3.2 are interpreted 
as setting out an additional requirement which 
must be met by subject parties in order to qualify 
for the employee exception. — The s e s tatute s are 
interpreted to require that all electrical work done 
in the name of the employing licen s ee be per 
formed under the direction and s upervision of a 
listed qualified individual regularly employed by 
the licensee. The Board may, at its discretion, call 
for s ati s factory evidence that this requirement has 
been or ia — being fulfilled with — re s pect to the 
individual employee and the specific work for 
which the exception is claimed. The employing 
licensee, the employee, and every listed qualified 
individual of the licensee shall furnish any infor- 
mation the Board may require, including affidavits, 
to evaluate and determine a claim of employee 
exemption. 

(c) G.S. 87 4 3 and 87 4 3.2 arc further interpret 
ed as placing a joint respon s ibility on the employ 
ing licensee, the individual employee, and every 
li s ted qualified individual to furni s h any informa 
tion the Board may require to evaluate and deter 
mine a claim of employee exception. — Ordinarily, 
the employing licen s ee will be expected to provide 
information in affidavit form on a form furnished 
by the Board. 

(c) fd-) When the information furnished to the 
Board does not substantiate compliance with this 
Rule, the individual shall be deemed to be an 
independent contractor rather than an employee 
and shall be subject to G.S. Chapter 87, Article 4. 

(e) — When it is determined that a claim of cm 
ployee exception is not in compliance with this 
Rule, the Board has the duty to determine what, if 
any , action s hall be taken with respect to the 
alleged employing licensee or the alleged individu 
al employee to assure compliance with the North 
Carolina Electrical Contracting Licensing Act, s o 



that the life, health, safety and propocrty of the 
public may be protected. 

Statutory Authority G.S. 87-42; 150B-11(1). 

SECTION .0400 - LICENSING 
REQUIREMENTS 

.0401 LICENSE APPLICANTS: 

REQUIREMENTS FOR EACH 



CLASSIFICATION 

(a) An applicant for an electrical contracting 
license in each of the license classifications shall: 

(1) submit a completed application to the 
Board on a form provided by the Board 
for the license classification involved; 

(2) submit the annual license fee for the 
license classification involved as pre- 
scribed in Rule .0404 of this Section; 
and 

(3) furnish the name, signature and social 
security number of at least one person 
to serve as the listed qualified individu- 
al for the applicant's license. 

(b) Corporation or Partnership. If the license 
applicant is a corporation or partnership, the 
application shall contain the names and titles of the 
officers or names of the partners, whichever is 
applicable. 

(c) Intermediate and Unlimited Classifications. 
License applicants in the intermediate and unlimit- 
ed classifications shall also furnish a bonding 
ability statement or a line of credit letter issued by 
a bank, savings bank, or savings and loan associa- 
tion pursuant to G.S. 87-43. 2(a)(4). 

(d) Special Classifications. A license applicant 
in the SP-EL, SP-PH, SP-WP, SP-ES or SP-SP 
classification must also include on the license 
application information verifying that the applicant 
is conducting a lawful business in the State of 
North Carolina in the license classification in- 
volved. 

Statutory Authority G.S. 87-42; 87-43.2; 87-43.3; 
87-43.4. 

.0403 SEPARATE LICENSE 
REQUIREMENTS 

(a) A separate license certificate and license fee 
shall be required for each separate place of busi- 
ness with at least one listed qualified individual 
indicated thereon. No listed qualified individual 
shall be indicated on more than one license certifi- 
cate at the same time except where a place of 
business has one listed qualified individual with 
licenses issued in different classifications. T-he 



li s ted 



i s ted qualified individual or individuals indicated 
on the separate licen s e certificate shall be rcsponsi 
blc for supervising and directing the electrical 
work performed by the separate place of business 
covered under the certificate. 

(b) As used in G.S. 87-43, the term "each 
separate place of business" means: 

(1) the one place of business of a firm in 
the case where an electrical contracting 



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January 15, 1993 



2334 



PROPOSED RULES 



firm conducts its business from only 
one place; and 
(2) the principal place of business and each 
of the other places of business of a 
firm in the case where an electrical 
contracting firm is conducting its busi- 
ness from more than one place. 

Statutory Authority G.S. 87-42; 87-43; 87-43.2. 

SECTION .0700 - LICENSING 
RECIPROCITY 

.0703 RECIPROCITY: VIRGINIA 

Pursuant to the provisions of Rule .0701 of this 
Section — ftftd — the — formal — re s olution — agreement 
between the Board and the Virginia State Board 
for Contractors, licen s ee s of the Virginia Board. 
who — ftfe — non residents — of North — Carolina. — afe 
eligible to apply for and obtain a North Carolina 
electrical contracting license and North Carolina 
licensees, who are non re s ident s of Virginia, are 
eligible to apply to the Virginia board and obtain 
a Virginia electrical contracting license in elassifi 
cations as prescribed in the fo l lowing table: 



VIRGINIA LICENSEE 
ELIGIBLE FOR NORTH CAROLINA LICENSE 

Clas s A 
Limited, intermediate or unlimited 

NORTH CAROLINA LICENSEE 
ELIGIBLE FOR VIRGINIA LICENSE 



Intermediate 



Class A 



Unlimited 
Class A 

Statutory Authority G. S. 87-42; 87-50. 

SECTION .1000 - DESCRIPTION OF 

FORMS, CERTIFICATES AND 

PUBLICATIONS 

.1001 FORMS PROVIDED BY THE BOARD 

(a) Examination Applications. An application is 
provided to a person wishing to apply to take a 
qualifying examination for an electrical contracting 
license. The application is designed for an appli- 
cant to furnish the following information: 

(1) date; 

(2) name, address and telephone number; 

(3) age; 



(4) 

(5) 

(6. 



(7) 
(8) 
(9) 

:io 



13) 



social security number; 
whether or not applicant has taken a 
qualifying examination previously; 
classification of license for which appli- 
cant wishes to qualify and amount of 
application-examination fee; 
educational background: 
experience background; 
character references; 
criminal convictions: 
fiO) other references or information 
applicant wishes the Board to consider: 
fH-> authorization for board to research 
all information submitted on or in 
support of applicant; and 
H-2-> signature of applicant. 

(b) Examination Review Applications. Each 
failing examinee is provided a form for his use in 
applying for a detailed review of his failed exami- 
nation. This form is designed for the applicant to 
furnish the following information: 

(1) date; 

(2) name, address and telephone number: 

(3) social security number: 

(4) date he took his failed examination: 

(5) location in which he took his failed 
examination: 

(6) examination review fee; and 

(7) signature of applicant. 

(c) License Applicants. Each license applicant 
is provided with an application form for his use in 
initially applying for a license. The application 
form is designed for the applicant to furnish the 
following information: 

(1) classification of license for which he is 
applying; 

(2) name in which he wishes the license to 
be issued; 

(3) business mailing and location address; 

(4) business and home telephone numbers; 

(5) whether business is partnership or 
corporation and. if so. the names of the 
partners or the names and titles of 
officers of the corporation: 

(6) whether business is to be operated 
part-time or full-time; 

(7) names, signatures and social securitv 
numbers of the listed qualified individu- 
als to be indicated on the license; 

(8) annual license fee; 

(9) criminal convictions: 

( 10) v^) authorization for board to research 
all information submitted on or in 
support of application: 

(11) f+94 date; and 



2335 



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NORTH CAROLINA REGISTER 



Januarx 15, 1993 



PROPOSED RULES 



( 12) fJ-H signature and title of applicant. 

(d) License Renewal Applications. Each licens- 
ee is provided with an annual license renewal 
application prior to the expiration of his current 
annual license. This application form is designed 
for the licensee to furnish the following informa- 
tion: 

(1) name in which his license is currently 
issued; 

(2) whether license is to be renewed in 
same name or, if not, new name in 
which he wishes license to be renewed; 

(3) mailing and business location address; 

(4) business and home telephone numbers; 

(5) whether business is to be operated 
part-time or full-time; 

(6) whether business is partnership or 
corporation and, ts if so. the names of 
the partners or the names and titles of 
officers m of the corporation; 

(7) names, signatures and social security 
numbers of the listed qualified individu- 
als to be indicated on new annual li- 
cense; 

(8) annual license fee; 

(9) authorization for board to research all 
information submitted on or in support 
of application; 

(10) date; and 

(11) signature and title of applicant. 

(e) Request for Change of Name or Address in 
Which License Is Issued. A licensee wishing to 
change his license name or address is furnished a 
form for his use in requesting a change of name or 
address. This form is designed for the licensee to 
furnish the following information: 

(1) name and address in which license is 
currently issued; 

(2) name and address in which license is to 
be reissued; 

(3) whether business is to be operated 
part-time or full-time; 

(4) whether business is partnership or 
corporation and. if so, the names of the 
partners or the names and titles of 
officers w of the corporation; 

(5) certification of listed qualified individu- 
al by name and conditions of employ- 
ment; 

(6) name and title of person filing request 
and date of request; and 

(7) signature of listed qualified individual. 

(f) License Applications: South Carolina Reci- 
procity. These forms are designed for an applicant 
to furnish the same type of information as is 



provided on the forms described in Paragraphs (c) 
and (d) of this Rule, with the following additional 
information: 

( 1 ) name in which applicant's current South 
Carolina license is issued; 

(2) classification of applicant's South Caro- 
lina license; 

(3) number of current South Carolina li- 
cense; 

(4) statement from South Carolina Licens- 
ing Board for Contractors certifying the 
individuals who are qualified under the 
applicant's South Carolina license and 
the extent of each individual's qualifica- 
tions; and 

(5) names, signatures and social security 
numbers of the listed qualified individu- 
als on South Carolina license and to be 
indicated as such on North Carolina 
license. 

fg) — License Application: — Virginia Reciprocity. 
These forms are de s igned for the applicant to 
furnish essentially the same type of information as 
is provided on the forms described in Paragraphs 
(c), (d) and (f) of this Rule. 

(g) (fr) License Application: Alabama Reciproc- 
ity. These forms are designed for the applicant to 
furnish essentially the same type of information as 
is provided on the forms described in Paragraphs 
(c). (d) and (f) of this Rule. 

(h) ft) License Application: Georgia Reciproci- 
ty. These forms are designed for the applicant to 
furnish essentially the same type of information as 
is provided on the forms described in Paragraphs 
(c). (d) and (f) of this Rule. 

ill tt) Bonding Ability Statement. A bonding 
ability statement form is provided to an applicant 
wishing to obtain a license in either the intermedi- 
ate or unlimited classification. This form is to be 
completed by a bonding company duly licensed to 
issue performance bonds in North Carolina. The 
form is designed for the bonding company to state 
its bonding experience with the applicant and 
amount of performance bond the bonding company 
would be willing to issue to the applicant at on the 
date the form is completed and signed. The 
signer's power of attorney must accompany the 
bonding ability statement form. 

(j) ikj Certification of Listed Qualified Individu- 
al. This form is provided to any licensee or 
applicant for a license whose listed qualified 
individual is someone other than the licensee or 
applicant for a license. This form is designed for 
the licensee or applicant for a license to certify 
who will be the listed qualified individual for the 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2336 



PROPOSED RULES 



licensee and that the listed qualified individual is, 
or will be, regularly employed by the licensee and 
has, or will have, the specific duty and authority to 
supervise and direct all electrical installation, 
maintenance, alteration or repair of any electric 
wiring, devices, appliances or equipment done in 
the name of the licensee. 

(k) i\) Affidavit certifying Bona Fide Employee. 
This affidavit form is provided to any licensee 
whose relationship with his employees has been 
challenged and it is alleged that some someone 
other than his bona fide employee is engaged in 
electrical work under the auspices of his license. 
The form must contain the signature and title of 
the person completing the form and must be 
notarized. The form is designed for the licensee to 
furnish information establishing thtrfr compliance 
with the requirements of Rule .0306(a)(2) and (3) 
of this Subchapter. 

•(-!-) the per s on in question i a employed by 

the licensee in the capacity of a me 
chnnic (journeyman electrician); 

{2) the — e mployee — receives — compen s ation 

from the licensee which i s rea s onably 
related to the hour s work e d, — or the 
work accomplished, by the employee 
for the licensee; 

-tf* 



-& 



;lntcd 



related compensation paid to tnc 
employee — is — reported — te — federal — and 
state tax authorities a s earning s of the 
individual employee with appropriate 
deduction s taken and reported for with 
holding taxe s and FICA contributions; 

f4) con s i s tent — with — applicable — laws, — the 

employee is covered by the licensee' s 
workers' compensation in s urance; and 

f§-) all work performed by the employee i s 



jrformed — under — tht 



iirection 



-and 



supervision of a listed qualified individ 
ual regularly employed by the licensee. 

Statutory Authority G.S. 87-42; 150B-11. 



.1003 

The 
Board 

(1) 

(2) 



(3) 



PUBLICATIONS AVAILABLE FROM 
THE BOARD 

following publications are available from the 

Laws applicable to electrical contracting 
in the State of North Carolina; 
Rules of the Board, including rules of 
general applicability and rules applicable 
to special restricted classifications; 
Information booklet for persons applying 
to take the qualifying examination for an 
electrical contracting license in the limit 



ed, intermediate or unlimited each license 

classification; 
(4) Annual Continuing Education Information 

Booklet; and 
(5] (4) The National Electrical Code, NFPA 

70, at the current price. ; and 
{§) The — North — Carolina — B uilding — Code, 

Volum e — W — Electrical, — at the current 

price. 



Statutory- Authority G.S. 87-42; I50B-JJ. 

SECTION .1100 - CONTLNTJING 
EDUCATION 

.1103 MINIMUM REQUIREMENTS FOR 
COURSE INSTRUCTOR APPROVAL 

(a) Each course instructor shall submit an 
application for continuing education course instruc- 
tor approval to the Board on a form provided by 
the Board by March 1 of the year prior to the 
license period (July 1 - June 30) in which the 
course will be offered. The application shall 
include but is not limited to: 

( 1 ) The name of the instructor; 

(2) Instructor's address and telephone 
number; 

(3) The name of the course sponsor; 

(4) Course title; 

(5) Course contact hours; and 

(6) Qualifications of instructor. 

(b) To qualify a s an approved continuing eduea 
tion cour s e in s tructor: 

■(4-) The instructor shall have professional 

or trade experience evidenced by an 
appropriate — license, — certification — ef 
degree; or 

(2) The instructor s hall have other rccog 

nized expertise in the electrical indus 
try. 
(b) Beginning March _]_. 1994, no applicant shall 
be considered for approval as a continuing educa- 
tion course instructor unless the applicant satisfies 
at least one of the following: 

(1) Be a "qualified individual" as defined in 
G.S. 87-41 .1(1) and certified as such 
by the Board pursuant to G.S. 87-42. 
This applicant will be considered for 
approval as a continuing education 
instructor to teach courses in the same 
or lower license classification jn which 
the applicant is certified as a "qualified 
individual" as follows: 

Unlimited - Any License Classifi- 



cation 



2337 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Intermediate 



Intermediate, 



Limited. SP-SFD and any SP-Restricted Classifica- 



tion 

Limited - Limited. SP-SFD and 
any SP-Restricted Classification 

SP-Restricted - Only ]n same 
SP-Restricted Classification 

(2) Have passed the Continuing Education 
Instructor Examination prescribed and 
conducted by the Board. This applicant 
will be considered for approval as a 
continuing education instructor to teach 



courses in any license classification. 



13] 



Be a "qualified code-enforcement offi- 
cial" as defined in G.S. 143-151 .8(a)(5) 
and certified as such by the North 
Carolina Code Officials Qualification 
Board as holding qualifications for an 
electrical inspector in Standard Level 
III. Standard Level II or Standard Level 
I categories. This applicant will be 
considered for approval as a continuing 
education instructor to teach courses in 
license classifications as follows: 

Standard Level III - Any License 
Classification 

Standard Level II- Intermediate, 
Limited. SP-SFD and any SP-Restricted Classifica- 
tion 

Standard Level I - Limited, SP- 
SFD and any SP-Restricted Classification. 

(4) Be found by the Board to have profes- 
sional or trade experience or other 
special qualifications qualifying him to 
teach courses in the license classifica- 
tion or classifications determined by the 
Board. 

(c) The Board may deny an application if it 
finds that the applicant has failed to comply with 
the terms of any agreement as provided in Para- 
graph (g) of this Rule or the rules of the Board. 

(d) fe-> The course instructor application shall 
be submitted together with the application for 
continuing education course sponsor approval as 
prescribed in Rule . 1 102 of this Section. 

(e) fd) The Board shall approve or deny applica- 
tions at its April meeting. 

(f) (e) Appeals from denials shall be heard by 
the Board at a scheduled meeting in May. 

(g) ff) Upon approval of the application, each 
approved instructor shall agree to conduct courses 
in accordance with this Section and shall indicate 
his agreement by signing a continuing education 
instructor agreement form provided by the Board. 



Statutory Authority G.S. 87-42; 87-44.1. 

iSotice is hereby given in accordance with G.S. 
150B-21.2 that the North Carolina State Board of 
Examiners in Optometry intends to adopt rules 
cited as 21 NCAC 42B .0113, .0203 - .0204, 42E 
.0104, 42L .0004, 42M .0001 -.0006; and amend 
rules cited as 21 NCAC 42A .0001, .0005, 42B 
.0101, .0103, .0104, .0107, .0110, .0201 -.0202, 
.0302, 42E .0102-. 01 03, .0201, .0203, .0301- 
.0302, 42L .0002, .0005. 

(Editor 's Note: Tlie Board is proposing to adopt a 
new rule cited as 21 NCAC 42L .0004 and renum- 
ber existing rules .0004 - .0015 to .0005 - .0016. ) 

1 he proposed effective date of this action is April 
1, 1993. 

1 he public hearing will be conducted at 9:00 
a.m. on February 1 , 1993 at the office of'Womble, 
Carlyle, Sandridge & Rice, 227 Fayetteville Street 
Mall. 800 Wachovia Building, Raleigh, NC 27602. 



MXeason for Proposed Action: 



21 NCAC 42A .0001 - To provide the Board's 
phone number and fax number. 
21 NCAC42A .0005 - To define the term "Execu- 
tive Director". 

21 NCAC 42B .0101 - To update list of approved 
schools. 

21 NCAC 42B .0103, .0104 and .0110 - Replace 
references to "Board secretary" with "Board 
office ". 

21 NCAC 42B .0107 - To revise and update the 
requirements to take the clinical practicum exami- 
nation. 

21 NCAC 42B .0113 - To provide a process for 
applying for reexamination. 

21 NCAC 42B .0201 -.0202 - To revise the proce- 
dure for notifying the Board of beginning practice 
or opening a branch office. 

21 NCAC 42B .0203 - To require a relief optome- 
trist to obtain a duplicate license before beginning 
practice. 

21 NCAC 42B .0204 - To set up procedures for 
ceasing to practice. 

21 NCAC 42B .0302 - To revise the procedure for 
Board approval of continuing education courses. 
21 NCAC 42E .0102-.0103 - To update require- 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2338 



PROPOSED RULES 



merits concerning professional responsibility and 
dispensing of legend drugs. 

21 NCAC 42E .0104 and .0201 - To require 
optometrist to maintain independent control over 
his practice and to assure physical access as 
needed to his practice location. 
21 NCAC42E . 0203 - To provide that optometrists 
may practice as staff optometrists or independent 
contractors in certain circumstances. 
21 NCA C 42E . 0301 -. 0302 - To define the types of 
disciplinary action the Board may take and to 
define additional practices considered to he unethi- 
cal. 

21 NCAC 42L .0002 and .0005 - To clarify when 
"notice" is received for purposes of requesting an 
administrative hearing and for filing answer to a 
notice of hearing. 

21 NCAC 42L .0004 - To create a committee on 
investigations. 

21 NCAC 42M .0001 -.0006- To provide for Board 
oversight of optometrist/preceptors and 
studepreceptees. 

Ksomment Procedures: Requests to make oral 
comments at the hearing must he received by the 
Board no later than 10:00 a.m. on January 25, 
1993. Oral comments may be limited to 3 minutes. 
Written comments must be received by February 
15. 1993. The Board's address is P.O. Drawer 
609. Wallace. NC 28466-0609. 

CHAPTER 42 - BOARD OF EXAMINERS IN 
OPTOMETRY 

SUBCHAPTER 42A - ORGANIZATION 

.0001 LOCATION 

The location of the office of the Board is tfe* 



)f th e Board. 



offic e addr ess of th e S e cr e tary — ot th e 
321 E. Main Street. P.O. Drawer 609. Wallace. 
North Carolina. 28466-0609. The Board's phone 
number is (919) 285-3160; its WATS number is 
(800) 426-4457 (in-state only); and its fax number 
is (919i 285-4546. 

Statutory Authority G.S. 90-117.5. 

.0005 DEFINITIONS 

The following definitions apply to 21 NCAC 42 
only: 

(1) The term "Board" refers to the North 
Carolina State Board of Examiners in 
Optometry. 

(2) The term "President" refers to the Presi- 



dent of the North Carolina State Board of 
Examiners in Optometry. 

(3) The term "Secretary" refers to the Secre- 
tary-Treasurer of the North Carolina 
State Board of Examiners in Optometry. 

(4) The term "Executive Director" refers to 
the Executive Director of the North 
Carolina State Board of Examiners i_n 
Optometry. 

Statutory Authority G.S. 90-117: 90-117.5. 

SUBCHAPTER 42B - LICENSE TO 
PR\CTICE OPTOMETRY 

SECTION .0100 - LICENSE BY EXAMINA- 
TION 

.0101 GRADUATE OF APPROVED 
SCHOOL 

(a) The Board may grant recognition and ap- 
proval to a school or college of optometry, deny 
or rescind recognition and approval, or make any 
recognition and approval granted by the Board 
conditional or probational. based on the Board's 
determination of the quality of the educational 
programs and offerings of the school or college of 
optometry. Their optometric educational programs 
having been duly accredited by the Council of 
Optometric Education of the American Optometric 
Association and recommended to the Board by the 
International Association of Boards of Examiners 
in Optometry as worthy of approval, the following 
accredited schools and colleges of optometry are 
hereby recognized and approved: 

( 1 ) University of Alabama in Birmingham 
School of Optometry 

University Station 
Birmingham. AL 35294 

(2) University of California. Berkeley 
School of Optometry 

Minor Hall 
Berkeley. CA 94720 

(3) Southern California College of Optometry 
2575 Yorba Linda Blvd. 

Fullerton. CA 92631 

(4) Ferris State College 
College of Optometry 
Big Rapids. MI 49307 

(5) University of Houston 
College of Optometry 
4 901 Calhoun 

Houston. TX 77004 -_ 6052 

(6) Illinois College of Optometry 
3241 South Michigan Avenue 



2339 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



(7, 

(8) 
(9) 

(10) 
(11) 

(12) 
(13) 
(14) 

(15) 

(16) 

(17) 



(b) 
cil of 



Chicago, IL 60616 

Indiana University 

School of Optometry 

800 East Atwater 

Bloomington. IN 47405 

New England College of Optometry 

424 Beacon Street 

Boston, MA 02115 

State University of New York 

State College of Optometry 

100 East 24th Street 

New York, NY 10010 

The Ohio State University 

College of Optometry 

338 West Tenth Avenue 

Columbus, OH 43210 

Pacific University 

College of Optometry 

2043 College Way 

Forest Grove. OR 97116 

Pennsylvania College of Optometry 

1200 West Godfrey 

Philadelphia, PA 19141 

Southern College of Optometry 

1245 Madison Avenue 

Memphis, TN 38104 

University of Waterloo 

School of Optometry 

Faculty of Science 

Waterloo Ontario Canada N2L 3G1 

Inter American University of Puerto Rico 

School of Optometry 

G.P.O. Box 3255 

San Juan. PR 00936 

University of Missouri-St. Louis 

School of Optometry 

8001 Natural Bridge Road 

St. Louis, MO 63121 

University of Montreal 

School of Optometry 

Ecolo d'optometrie 

3750 Jean Brilliant 

Case Postale 6128, Succursale "A" 

Montreal, P.Q. Canada H3C 3J7 

Northeastern State University 

College of Optometry 

1001 N. Grand 

Tahlequah, OK 74464 

Southeastern University of the Health 

Sciences 

College of Optometry 

1 750 N.E. 168th Sl 

North Miami Beach. FT 33162 
The Board may request a copy of the Coun- 
Optometric Education's accreditation report 



on each school or college recognized and approved 
by the Board and for each school or college which 
has requested recognition and approval or for 
which the Board is considering recognition and 
approval. 

Statutory Authority G.S. 90-117.5; 90-1 18(a), (b). 

.0103 APPLICATION FOR LICENSURE BY 
EXAMINATION 

One desiring to obtain the application form for 
licensure by examination shall specify the date of 
the examination when requesting the application 
form. The application shall be made on 
Form BEO-1 supplied bythe Board. The complet- 
ed application form and the proper fee must be 
received by in the Secretary Board office 60 days 
prior to the examination date. 

Statutory Authority G.S. 90-118; 90-117.5. 

.0104 APPLICATION FOR LICENSURE BY 
RECIPROCITY 

Requests for application for licensure under the 
provisions of G.S. 90-118.5 shall be accompanied 
by the appropriate fee and shall be made on 
Form BEO-1 supplied by the Board. The applica- 
tion and supporting documents required by G.S. 
90-118.5 must be received by m the Secretary 
Board office 60 days prior to the date of the 
clinical practicum examination for which the 
application is being made. 

Statutory Authority G.S. 90-117.5; 90-118.5. 

.0107 WRITTEN EXAMINATION 

(a) Each applicant must submit evidence of 
having reached the recommended levels of accept- 
able performance on all parts of the National 
Board examinations given by the National Board of 
Examiners in Optometry within the ten year s on or 
after the April. 1978 administration in one of the 
following formats and under the following condi- 
tions prior to Board approval of his application to 
take the clinical practicum examination adminis- 
tered by the Board and shall cause to be furnished 
a true written copy of the authorize the release of 
his official score report of such by the National 
Board examinations to the Secretary of the Board 
prior to the approval by the Board of his applica- 
tion to take the clinical practicum examination. 
UJ April, 1978 through August, 1986 
administrations: passing scores on 
Parts L HA, and IIB. with scores of not 
less than 75 m Section 7 (Pathology) 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2340 



PROPOSED RULES 



and Section 9 (Pharmacology) on the 
Part IIB examination. Score of not less 
than 75 on the National Board's Treat - 



tional Board under the old Content Outline will bo 



ment and Management of Ocular Dis- 
ease ("TMOD") examination. 

(2) April, 1987 through August, 1992 
administrations: passing scores on the 
Basic Science examination and Clinical 
Science examination of the National 
Board, with scores of not less than 75 
on the Ocular Disease/Trauma and 
Clinical Pharmacology sections of the 
Clinical Science examination. A score 
of not less than 75 on the National 
Board's TMOD examination. 

(3) April, 1993 and thereafter: passing 
scores on Basic Science and Clinical 
Science Examinations of the National 
Board, with a score of not less than 75 
on the Ocular Disease/Trauma compo- 
nent within the Clinical Science exami- 
nation, and a score of not less than 75 
on either the TMOD component within 
the Clinical Science examination, or on 
the equivalent stand-alone TMOD 
examination. 

(h) For candidates with passing scores on at 
least one National Board examination part under 
different formats and time periods described j_n 
(a)( I) and (a)(2) of this Rule, the following equiva- 
lences shall apply: 

( 1 ) Parts I and HA are the equivalent of 
Basic Science. 

(2) Part IIB is the equivalent of Clinical 
Science without the inclusion of 



TMOD. 



hurt he 



«4 



icr, e ach applicant s hall s ubmit evidence 
having taken and pa ss ed the Treatm e nt and Man 
agement of Ocu l ar Di s ea s e Examination given by 
the National Board of Examiners in Optometry 



under the auspie 



)f the International Association 



of Board s of Examiners in Optometry (IAB). Thi s 
examination, coupled with the section pail s of the 
Ba s ic and Clinical Science examinations, to wit. 
Basic — Pharmacology — within — the — Ba s ic — Science 
examination — em4 — Ocular — Di s ea s e/Trauma — ami 



C4 



-Phf 



ithin the Cli 



-Set 



inieal I'nnrmneology within the Clinical science s 
examination, form the basis of the Board' s cvalua 
tion of a candidate's didactic ability to use and 
pro s cribe pharmaceutical agents in the practice of 
optometry. — Therefore, a minimal s core of 75 i s 
required on each of the herein eitcd section scores 
of the National Board and on the IAB therapeutic 
examination. 
— fb} — Applicant s who took and passed the Na 



required to submit minimum scores of 75 on each 
of Sections 7 and 9 of that outline, along with a 
pa ss ing score on the Treatment and Management 
of Ocular Disease Examination. 



History Note: 
90-118. 



Statu ton- A uthoritx G. S. 90-11 7. 5; 



.0110 PASSING SCORE 

An applicant must attain an average grade of 75 
on each part of the clinical practicum examinations 
to pass the examination and be issued a license. 
No applicant who has received a grade of less than 
60 on any part of the clinical practicum examina- 
tion shall be considered eligible for licensure even 
though his overall clinical practicum score may 
average 75. Each applicant will be notified by the 
S e cr e tary Executive Director as to his success or 
failure after the results of the examination have 
been determined by the Board. 

Statutory Authority G.S. 90-117.5; 90-118. 

.0113 REEXAMINATION 

(a) A completed application, except for school 
transcripts, birth certificate, and National Board 
scores, is required in case of reexamination. The 
completed application accompanied by the proper 
fee must be received m ffie Board office 60 days 
prior to the examination date. 

(b) Any applicant who has failed the clinical 
practicum examination three times after the effec- 
tive date of this Rule shall be deemed ineligible to 
apply for reexamination until he successfully 
completes an additional course of study in clinical 
optometry encompassing at least one academic 
year, such course to be approved by the Board. 
Such applicant shall submit evidence satisfactory to 
the Board of the additional study at ffie time he 
makes application for reexamination. 

Statutory Authority G.S. 90-117.5; 90-118. 

SECTION .0200 - RESPONSIBILITY TO 
SUPPLY INFORMATION 

.0201 BEGINNING PRACTICE; 
RELOCATING PRACTICE 

Upon Within 10 days of beginning practice, a 
licensee shall notify the S e cr e tary of th e Board [n 
writing as to the fu 1 1 and complete mailing ad- 
dress, including the street address, of his office 
and the telephone number of such office . If at any 
time any office is relocated, the licensee involved 



2341 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



shall notify the Secretary Board of his new office 
address and telephone number. The address so 
identified shall constitute the his primary practice 
address and the address to which all information 
pertaining to his licensure shall be addressed, tf; 
for any reason, the licensee cease s to practice, he 
shall so notify the Secretary. 

Statutory Authority G.S. 90-117.5. 

.0202 BRANCH OFFICE 

Before opening or beginning practice in a branch 
office, an optometrist s hall apply for must obtain 
a duplicate license to be displayed in the branch 
office. T-h4s The application for a branch office 
license must be made on Form BEO-3, which can 
be acquired from the Secretary Board . If in the 
opinion of the Board Rules 42E .0102(2) and 
42E .0102(4) of this Chapter are met, the Secre 
tary Board shall notify the optometrist making 
application of the approval of the request and upon 
receipt of the required fee such duplicate license 
shall be issued by the Board for the purpose of 
display in the branch office for which it is u s ed 
issued in compliance with G.S. 90-118.2 and 90- 
1 18.4. A duplicate license is not transferable from 
one practice location to another, nor from one 
practitioner to another. In the event that a practice 
i s di s continued at n location for which a duplicate 
license has been i ss ued, the practitioner involved than 

shall return the license to the Secretary for cancel 
lation. Within the meaning of this section a 
nursing home js considered a branch office when 
there is an agreement between the optometrist 
and/or his representative that he will provide 
optometric services on a scheduled basis within the 
nursing home; provided however, any optometrist 
who accepts a request to make emergency calls to 
patients at a nursing home within 20 miles of his 
practice location(s) as reflected in the Board 
records is not required to obtain a duplicate license 
for that location. 

Statutory Authority G.S. 90-117.5; 90-118.2; 90- 
118.4. 



.0203 TEMPORARY OR RELIEF 
OPTOMETRIST 

Before providing optometric services on a tempo- 
rary or relief basis for which he will receive 



patient to whom such optometrist renders optomet- 
ric services. 

Statutory Authority G.S. 90-117.5; 90-118.2; 90- 
118.4. 

.0204 CEASING PRACTICE 

(a) In the event an optometrist shall cease to 
practice at any practice location as defined in 
Rules .0201 and .0202 of this Section, the optome- 
trist shall notify the Board in writing within ten 
days of ceasing practice, indicating the reason for 
discontinuing practice and the disposition of patient 
records. 

(b) In the event that a licensee discontinues 
practice at a location for which a duplicate license 
has been issued, the licensee shall return the 
license to the Board for cancellation within 30 
days. 

(c) On ceasing practice at any location, the 
licensee shall notify those patients whose records 
he retains in accordance with Rule 21 NCAC 42 E 
.0102(5) of the disposition and/or availability of 
such records. Such notice shall be given by direct 
mail or through a public announcement in a news- 
paper of general circulation in the county or 
counties wherein the patients reside. If such notice 
is given by publication, such publication shall 
occur not less than weekly for a period of not less 
than ninety days. 

(d) Any licensee ceasing practice shall maintain 
control and custody of the records located at that 
practice location until such time as such records 
are transferred to the patients or to the custody of 
another practitioner similarly licensed. 



compensation, for any period of time, an optome- 
trist must first obtain a duplicate license for each 
location at which he will provide such services. 
The identity of such temporary or relief optome- 
trist should clearly appear j_n the record of each 



Statutory Authority G.S. 90-117.5; 90-118.2. 

SECTION .0300 - ANNUAL LICENSE 
RENEWAL 

.0302 CONTINUING EDUCATION 

(a) Each optometrist holding a certificate of 
registration shall take annual courses of study 
approved by the Board related to and essential to 
the practice of optometry as defined in G.S. 90- 
114. It is the intent of the Board that this require- 
ment be met by the taking of courses whose 
content and quality of presentation are reasonably 
assured to the end that the licensee's abilities m 
order to meet the public demand of acceptable 
standards of care are enhanced and that currency 
of knowledge is insured. demands of quality of 
care, to en s ure appropriate standards of care, and 
to en s ure currency of knowledge . 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2342 



PROPOSED RULES 



(b) It is the responsibility of each licensee to 
determine if a course has been approved by the 
Board prior to the taking of the course and submit- 
ting it for credit. 

(c) No course or course offering will be consid- 
ered for approval unless the vendor or sponsor has 
submitted to the Board no later than 30 days prior 
to the offering of the course information deemed 
sufficient by the Board as to the course title, 
course format, course content and learning pur- 
pose, lecturers including curriculum vitae. dates 
courses are offered, city and state where offered, 
and the name, address, and telephone number of 
the vendor or sponsor and the contact person(s) to 
whom inquiries can be made. without first having 
been classified by and in accordance with the 
standards of the National Continuing Education 



^+ 



ossification System ot the International Associa 
tion of Boards of Examiners in Optometry (IAB). 

(d) Those courses that have boon are approved, 
including the type and number of hours of credit. 
will be entered into the Board's central data base 
and the vendor or sponsor notified. Information 
concerning those courses that have been approved 
will be made available to any licensee making 
inquiry concerning course approval. transmitted by 



the Board to the IAB" 



antral registry within ten 



days of the receipt by the Board of the course 
classification. — This information will be avuilable 
to all licensees and vendor s from either the Score 
tary of the Board or from th e National Classifica 
tion Sy s tem of the International Association of 
Boards of Examiners in Optometry. 

(e) The Board will maintain continuing educa- 
tion data on-line in its central data base for a 
minimum period of five years preceding the next 
annual license renewal date. A yearly listing of 
credits shall be furnished each licensee at the time 
of license renewal. Additional reports will be 
available on request and the payment of a tran- 
script fee not to exceed five dollars ($5.00). 
Telephone inquiries as to current status of continu- 
ing education hours may be made during normal 
business hours. 

(f) Notification of the number of hours required 
by the Board for license renewal shall be given to 
each licensee at the time the licensee receives 
notice of annual license renewal. Such notice shall 
state the number of hours of approved continuing 
education that will be required in the following 
year in order to renew a license for the second 
following year. The number of required continu- 
ing education hours is 20. 

(gi In any calendar year no less than one third, 
or fixe hours, whichever is greater, nine hours of 



the continuing education requirement must be in 
courses within the area of ocular or general phar- 
macology, diagnosis, and therapeutics, or ad- 
vanced clinical procedures. It is expected that 
courses certified to meet this special requirement 
will be of sufficient length and depth to sufficiently 
address the subject matter in the course descrip- 
tions and will be taught by individuals who are 
appropriately qualified and have an acknowledged 
expertise in the area taught. 

(h) Courses of self-study where organized 
material is presented and written evaluations are 
later made are eligible for approval provided the 
vendor or sponsor has submitted the course or 
courses for classification approval as described in 
this Rule prior to its being offered to the licensee. 
However, no licensee shall receive credit for more 
than four hours of educational credit by this means 
in any calendar year. 

(i) Courses that are classified as practice admin- 
istration may be accepted by the Board for credit 
provided that no more than three hours ©f — \S 
percent of the total number of continuing education 
hours required , whichever is loss, will be accepted 
within one calendar year for the purposes of 
credit. 

(j) All courses accepted for credit must be taken 
within the calendar year for which the credit is 
applied; provided, however, that any course 
dependent upon an examination for successful 
completion may be certified to the Board following 
examination even if the examination or the results 
thereof are not available until the next calendar 
year. 

(k) Attendance at any course or courses ap- 
proved by the Board must be for the requisite 
period. It is the responsibility of the vendor or 
sponsor of the course to assure compliance with 
this requirement in accordance with Board policy 
and to so certify to the Board or it s agent at the 
appropriate time. Documentation of attendance 
may be transmitted: 

f4-» By way of the International Association 

of Boards of Examiner s in Optometry's 
central registry of continuing education 
in accordance with the guidelines e s tab 
lished by the regi s try: 
(3JJ By the vendor or sponsor of the educa- 
tion provided the documentation is in a 
form acceptable to the Board and con- 
tains the following information: 

(A) Course title and classification verifica- 
tion: 

(B) Vendor or sponsor identification; 

(C) Name of and license number of North 



2343 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



Carolina licensee; 
(D) Vendor or sponsor's attestation or 
verification of attendance. 
(il) By any licensee directly to the Board £3} 

provided that the attendance verification 
form utilized by the vendor has been 
approved by the Board or the IAB' s 
Central Registry of Continuing Educa 
tion, has been completed properly by 
the vendor or sponsor of the education 
and by the licensee, and has been prop- 
erly validated or certified, and the 
original form, and not a photocopy or 
facsimile, is submitted. 
(1) Electronic transfer of attendance records in a 
data base format compatible to the Board's or to 
the IAB's data management system is acceptable; 
provided, however, the Board may at any time 
within three years of the date of transfer call for a 
hard copy verification if in its opinion such verifi- 04) 

cation is necessary. 

(m) The continuing education requirement shall 
be waived only in cases of certified illness, or 
upon evidence satisfactory to the Board that the (45) 

applicant for renewal was unable to meet the 
requirement because of undue hardship. 

Statutory Authority G.S. 12-3.1; 90-117.5; 90- 
123.1. 

SUBCHAPTER 42E - MODE OF PRACTICE 

SECTION .0100 - RESPONSIBILITY FOR 
PATIENTS 

.0102 PROFESSIONAL RESPONSIBILITY 

In keeping with the professional code, aH — ©p- 
tometrist s the optometrist shall: 

(1) attend to the visual needs of all those 
seeking their his services without regard 
to financial remuneration; 

(2) maintain adequate equipment and instru- 
ments in their his offices at all times to 
assure proper and complete examination 
of patients. Such equipment and instru- 
ments shall include, but not be limited to, 
the following: a direct ophthalmoscope; 
an indirect ophthalmoscope; condensing 
lenses; proper instrumentation for foreign 
body removal; biomicroscope^; instru- 
ment for plotting central and peripheral 

fields.; corneal applanation tonometer^ £6) 

distance and near acuity chartSTi test 
objects for stereopsis and fusion-rj color 
vision testing apparatusv; refractor, trial 



frame or phorometer with trial case 
lensesTi ophthalmometer keratometer; and 
retinoscope; 

sterilize according to usage all instru- 
ments or equipment used ]n the treatment 
of optometric patients, including those 
instruments or equipment used for the 
removal of foreign bodies from the exter- 
nal eye or its adnexa. All optometric 



offices shall follow infection control 
recommendations as set forth from time 
to time in the infection control manual as 
recommended by the American Optomet- 
ric Association's Committee on Primary 
Care and Ocular Disease, or in the clini- 
cal guidelines of the American Optomet- 
ric Association's Clinical Guidelines and 
Quality Assurance Coordinating Commit- 
tee or their successors; 
assist his patients in whatever manner 
possible in obtaining further care when in 
their his opinion other than their his care 
is needed; 

maintain adequate and available records 
on every patient containing case history, 
findings, diagnosis, treatment, and dispo- 
sition. In compliance with this require- 
ment, the patient record shall include the 
name of the patient's family physician or 
any other physician who may be consult- 
ed with regard to the care of the patient. 
The name and dosage of any medication 
prescribed shall be recorded with the 
diagnosis and instructions to the patient 
concerning follow-up. In any instance 
where a therapeutic medication, other 
than a medication being topically applied, 
is prescribed the patient record should 
indicate that the consulting physician 
noted on the record is informed. Com- 
munication is desirable at the time of 
prescribing systemic medication; howev- 
er, in the event communication is not 
possible at that moment or if previous 
protocols have been agreed to by the 
consulting physician, the record should 
indicate such consultation or communica- 
tion took place within 72 hours and 
whether such consultation or communica- 
tion occurred by telephone, in writing, or 
otherwise; 

retain full and independent control of and 
responsibility for patient records. This 
requirement does not preclude the licens- 
ee from providing copies of patient spec- 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2344 



PROPOSED RULES 



tacle prescriptions for subsequent optical 
services, nor does It preclude the licensee 
from providing copies of patient records 
to any entity with the consent and autho- 
rization of the patient. Patient records 
shall be maintained by the optometrist 
responsible for such records for a period 
of not less than 5 years following the last 
entry into the patient's chart; 
(S7) treat all information concerning their his 
patients as confidential and not to be 
communicated to others except when 
authorized to do so by the patient or 
required by law; 

(8) have an established and appropriate pro- 
cedure for the provision of eye care to 
his patients [n the event of an emergency 
outside of normal professional hours, or 
when the licensee is not available due to 
vacation, personal illness, attendance at 
professional meetings or continuing edu- 
cation programs, or other absences of a 
similar nature. Patients shall be informed 
of such procedure. The procedure re- 
ferred to herein may include, but is not 
limited to. cooperative arrangements with 
another licensed optometrist or a physi- 
cian licensed under North Carolina Gen- 
eral Statutes Chapter 90. Article L a 
telephone answering system or pager; 
and/or written or posted instructions to 
the patient; 

(9) maintain full and independent control of 
the terms and conditions of any profes- 
sional liability insurance coverage per- 
taining to his services. 

Statutory Authority G.S. 90-18; 90-114; 90-121.2; 
90-127.2. 

.0103 PRESCRIPTIONS 

(a) All prescription forms shall conform to state 
and federal statutes governing such forms and shall 
include the name, address, state licensure number, 
and the Drug Enforcement Administration number 
of the prescriber, if applicable. The optometrist 
shall be responsible for providing appropriate 
safeguards within his practice to prevent the 
unauthorized use or diversion of his prescription 
forms, and shall immediately notify the Board 
upon determining that prescription blanks might be 
missing or misused. Should missing prescription 
blanks bear his PEA number, the optometrist shall 
also notify the North Carolina State Board of 
Pharmacy, giving that board the date he deter- 



mined that the prescriptions blanks were missing 
or misused, the number missing, and any informa- 
tion that could be of help in preventing unautho- 



rized use of the prescription blanks. 

(b) In the event that legend drugs being pre- 
scribed by the optometrist are dispensed by the 
optometrist, the optometrist shall cause the follow- 
ing written or printed information to be given to 
the patient for each such drug dispensed at the 
time the drug is dispensed: 
( 1 ) date of issuance; 

name and address of patient: 
name, address and telephone number of 
prescriber; 

name, strength, dosage form and quan- 
tity of drug dispensed; 

(5) the number of refills, if authorized; 

(6) route of administration of drug dis- 



ID 

i4l 



ill 



pensed; and 
directions for use. 



(be) On request within Within one year of 
examination, the optometri s t must furnish to a 
patient may request and is entitled to and shall 
receive a copy of the patient's their his spectacle 
or contact lens prescription. The prescription may 
show a statement of caution or a disclaimer if such 
a statement or disclaimer is supported by appropri- 
ate findings and documented patient records. An 
expiration date of not less than one year from the 
date of the prescribing examination shall appear on 
every such prescription. 

(ed) A prescription for contact lenses shall 
explicitly state that it is for contact lenses and 
indicate specify the lens type and all specifications 
necessary for the ordering and fabrication of the 
lenses. Words or phrases such as "OK for contact 
lenses", "fit with contact lenses", "contact lenses 
may be worn", or similar wording do not consti- 
tute a contact lens prescription. L'ntil all the 
requirements of a satisfactory fit of contact lenses 
have been determined by the prescriber, the 
contact lens prescription cannot be written. All 
contact lenses used in the determination of a 
contact lens prescription are considered to be 
diagnostic lenses. At such time that it has been 
determined that a prescription can be written, such 
prescription may show a statement of caution or a 
disclaimer if such a statement or disclaimer |s 
supported by appropriate findings and documented 
patient records. An expiration date consistent with 
the type and modality of use of the contact lens 
being prescribed shall appear on every such pre- 
scription. In the event that in the professional 
opinion of the prescribing optometrist, a patient is 
not adhering to appropriate regimens of care and 



2345 



7:20 



NORTH CAROLINA REGISTER 



January IS, 1993 



PROPOSED RULES 



follow-up with regard to the continuing use of 
contact lenses, the optometrist may terminate his 
optometric care of that patient and notify the 
patient that he is terminating such relationship and 
the reasons for doing so. 

Statutory Authority G.S. 90-114; 90-127.2; 90- 
127.3. 

.0104 ACCESS TO AND CONTROL OVER 
PRACTICE 

(a) The licensee shall maintain full and indepen- 
dent control of the scheduling and availability of 
optometric services to be provided by that licens- 
ee. 

(b) Each licensee is responsible for and shall 
retain full and independent control of information 
disseminated to the public through any advertising 
or other commercial medium when such informa- 
tion relates to optometric services being provided 
by the licensee. When practicing adjacent to or in 
proximity to a retail optical establishment that is 
expected to benefit from the sales of optical goods 
as a result of the optometrist's prescriptions, the 
optometrist is required to maintain absolute control 
over any print or other media advertising which 
may promote the use of his services, whether or 
not such advertising is paid for or sponsored by 
the optometrist. 

(c) The licensee shall have physical access to his 
practice location at all times. 

(d) Whenever any licensee enters into a lease or 
rental agreement to locate his practice within the 
exterior walls of a commercial or retail establish- 
ment, that practice location shall include an outside 
entrance to assure such access as may be needed 
by the optometrist and his patients to his optomet- 
ric practice at aU times. Further, the practice 
location within the commercial or retail establish- 
ment may have interior access from and to a 
public aisle, but such interior access shall not pass 
through or into any retail optical space within the 
establishment to the effect that the optometric 
practice shall be operated under the complete 
control of the optometrist. 

(e) Any lease or rental agreement through which 
a licensee may lease space for the operation of his 
optometric practice which im permissibly infringes 
upon the independent judgment of the optometrist 
or which impermissibly restricts the optometrist's 
professional judgment with regard to the operation 
of his practice or ffie care of his patients is in 
violation of these Rules and the Optometry Act. 
Provisions within a lease or provisions within any 
master lease to which a lease is subject which 



would violate this rule include, but are not limited 
to. provisions concerning: malpractice liability- 
insurance; regulation of ffie optometrist's business 
hours beyond 50 hours a week, or on weekends, 
religious holidays, and federal or state holidays; 
custody and control of the optometrist's patient 
records; the scheduling or rescheduling of patient 
examinations or follow-up care; the setting or 
discounting of professional fees; professional 
competition and advertising; and, the specification 
of particular drugs or optical goods to be dis- 
pensed to or prescribed for a patient. Any lease 
which is subject to a master lease to which the 
optometrist does not have ready access for purpos- 
es of assuring compliance with this Rule shall be 
deemed in violation of this Rule and Rule .0201 of 
this Subchapter. 

Statutory Authority G.S. 90-117.5; 90-121.2. 

SECTION .0200 - ETHICS 

.0201 GENERAL 

(a) The optometrist shall conduct his practice in 
a decorous, dignified and professional manner and 
in keeping with the rules as promulgated by this 
Board. 

(b) It js ffie continuing responsibility of the 
optometrist to maintain independent control over 
his practice in order to assure his independent 
professional judgment is not comprised in the 
rendering of patient care. 

(be) In any printed or oral reference by an 
optometrist to his practice, the primary designation 
must be "optometrist", "optometry", or "doctor of 
optometry". 

Statutory Authority G.S. 90-121.2. 

.0203 CONSULTANT: ADVISOR. STAFF 

OPTOlVffiTRIST. OR INDEPENDENT 
CONTRACTOR 

(a) An optometrist may: 

( 1 ) be engaged as a consultant. &f advisor. 
staff optometrist, or independent con- 
tractor for industrial plants where in- 
dustrial vision programs are being or 
have been instituted; or 

(2) be engaged as a staff optometrist inde- 
pendent contractor, or optometric ad- 
ministrator for health programs spon- 
sored or funded by any agency of mu- 
nicipal, county, state or federal govern- 
ment, or research organizations ef 
educational institutions, insurance com- 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2346 



PROPOSED RULES 



panies^ health maintenance organiza- 
tion, or hospitals. 
i hi In acting in the capacity of consultant, 
advisor., independent contractor, or staff optome- 
trist, the optometrist shall at all times remain 
cognizant of his professional responsibilities and 
shall with demeanor, decorum and determination 
retain his right of independent professional judg- 
ment and title in all situations and circumstances as 
he would in his own office. If at any time the 
right of independent professional title and judg- 
ment is abridged by the party or parties engaging 
the optometrist's services, it shall be mandatory 
upon the optometrist to resign or terminate the 
position as consultant, advisor^ ef staff optome- 
trist, or independent contractor and in so doing the 
intent of G.S. 90-125 would not be violated. 

Statutory Authority G.S. 90-117.5; 90-125. 

SECTION .0300 - UNETHICAL PRACTICES 
DEFINED:REVOCATION OF LICENSE 

.0301 PUNISHMENT FOR VIOLATION 
OF RULES 

In addition to the disciplinary action on the pail 
of the Board for violations of the rules of practice 
s et forth in Sections .0100 and .0200 of this 
Subchapter, and pursuant to G.S. 90 121.2. the 
Board may administer the punishment of private 
reprimand, suspension from the practice of optom 
etrv for a period not exceeding — 12 months, or 
revocation of license when any licensed optomc 
trist practicing in the state i s found to be guilty of 
any of the practices found in Rule .0302 of this 
Subchapter. The Board may invoke such disciplin- 
ary measures as k deems appropriate, including 
issuing a letter of warning or caution, reprimand. 
censure, suspension of a license, revocation of a 
license, and probation for violation of any statute 
governing the practice of optometry or of any Rule 
adopted by the Board. 

Statutory Authority G.S. 90-117.5; 90-121.2. 

.0302 UNETHICAL PRACTICES 

It is unethical for an optometrist to: 

( 1 ) solicit by means of advertising considered 
by the Board to be untruthful, false, 
misleading, deceptive, bait^and^switchuor 
fraudulent: 

(2) allow, permit, or otherwise condone by 
his failure to act in a timely manner to 
prevent his name , his practice, or his 
practice location from being presented to 



the public through any type of advertising 
which the optometrist did not pay for, 
purchase, or otherwise sponsor. This 
prohibition includes advertising which 
primarily advertises the services of a 
person or business other than the optome- 
trist or his practice, but which refers to 
or identifies the optometrist either direct- 
ly or by inference or implication: 

(3) discount his professional fees as an en- 
ticement for the sale of optical goods by 
himself or any optical dispensary located 
adjacent to or in close proximity to his 
practice: 

(2 4) fail to use the word "optometrist", the 
abbreviation "O.D.", or the words "doc- 
tor of optometry" whenever the 
optometrist's name appears in connection 
with his practice of optometry; 

(i 5) fail to list the name of each practitioner 
on any sign or lettering denoting the 
location of the practice or in any adver- 
tising promoting a practice when there is 
more than one optometrist practicing at 
the same location: the lettering of the 
optometrist's name and the lettering 
denoting the optometrist's designation as 
an optometrist shall be of comparable 
size and readability; 

(4 6 ) use the title "Optometrist" in connection 
with a profession or business considered 
foreign to the practice of optometry; 

(5 7) present his practice or practice location to 
the public as an optical store in order to 
entice the public to avail themselves of 
his professional optometric service while 
shopping for optical goods. In keeping 
with this Rule, an optometrist may make 
use of frame bars or selection cabinets 
provided such frame bars or selection 
cabinets are so placed within an office 
that they are not visible from outside the 
office the street, office entrance or from 
any reception area within the office ; 

(8) to allow his professional judgment to be 
unreasonably influenced by someone not 
directly responsible for the patient's well- 
being or welfare. Persons directly re- 
sponsible for the patient's welfare would 
include another optometrist, a physician. 
or a member of the patient's family; 

(6 9) give or accept rebates in any form to or 
from any person in return for an opportu- 
nity to generate or receive a professional 
fee; 



2347 



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NORTH CAROLINA REGISTER 



January 15, 1993 



PROPOSED RULES 



(7 fO) practice or use his license in a manner 
deemed to be in violation of G.S. 90- 
121.2 or 90-125; 

(8 IX) knowingly aid another person to violate 
the laws governing optometry; 

(9 J_2) engage in practice involving conduct 
which is inconsistent with the dignity of 
the profession or the rules of the Board. 
Such "unprofessional conduct" includes, 
but is not limited to, conduct which 
violates or does not meet any standard of 
behavior which through professional 
experience has become established in the 
profession of optometry in North Caroli- 
na. 

Statutory Authority G.S. 90-117.5; 90-121.2. 

SUBCHAPTER 42L - ADMINISTRATIVE 
HEARINGS: CONTESTED CASES 

.0002 REQUEST FOR HEARING 

(a) Any time When an individual believes that 
individual's rights, duties, or privileges have been 
affected by the Board's administrative action, but 
he has not received notice of a right to an adminis- 
trative hearing, that individual may file a formal 
request for a hearing. 

(b) Before an individual file s such a request, 
that indiv i dual is encouraged to exhau s t all rea s on 
able efforts to resolve the is s ue informally with the 
Board. Any person affected by or aggrieved by 
the Board's action or proposed action must file his 
request for an administrative hearing in the 
Board's office so that it is received by the Board 
within sixty days of the date such person receives 
notice of the Board's action or proposed action. 
For purposes of this Rule, "notice" js given by the 
Board and received by the affected individual: 

(1) for an action taken or proposed to be 
taken by the entire Board, on the date 
notice of such action is mailed by the 
Board to the affected person at his or 
her last known address according to the 
records of the Board; 

(2) for an action proposed by a committee 
of the Board, including a probable 
cause or investigatory committee, from 
the date the proposed resolution, pro- 
posal for settlement, or other proposed 
action is mailed to the affected person 
at his last known address as contained 
in the Board records. Provided, how- 
ever, that jf within thirty days of re- 
ceipt of such notice the affected person 



proposes in writing to continue informal 
negotiations to settle the matters at 
issue, the Board or its committee han- 
dling such matter may, in its discretion, 
agree to toj] the running of the sixty- 
day period or extend the sixty-day 
period on such terms as the Board 
deems appropriate; 
(3) for any person affected by a decision of 
the Board concerning licensure, includ- 
ing an approval or rejection of an appli- 
cation form for licensure, the approval 
or denial of an application for licensure 
under G.S. 90-118.5 or 90-118.7, or a 
decision by the Board that an applicant 
has passed or failed a clinical practicum 
examination administered by the Board, 
from the date notice of such decision js 
mailed to the affected person at his last 
known mailing address as contained in 
the Board records. 

(c) Sub s equent to s uch informal action, if still 
dissatisfied. To request an administrative hearing, 
the affected individual should submit a request 
bearing the following notation to the Board's 
office: REQUEST FOR ADMINISTRATIVE 
HEARING. The request should contain the 
following information: 

( 1 ) name and address of the petitioner, 

(2) a concise statement of the action taken 
by the Board which is challenged, 

(3) a concise statement of the way in which 
the petitioner has been aggrieved, and 

(4) a clear and specific statement of request 
for a hearing. 

(d) The request will be acknowledged promptly 
and, if deemed appropriate by the Board in accor- 
dance with Rule .0103 of this Section, a hearing 
will be scheduled. 

Statutory Authority G.S. 90-117.5; 150B-11; 150- 
38. 

.0004 COMMITTEE ON INVESTIGATIONS 

(a) Upon receipt of a written complaint alleging 
misconduct that might subject a licensee or other 
person to discipline, or upon notice of such other- 
wise coming to the Board's attention through 
investigatory means, the Board may investigate 
such matter to determine whether probable cause 
exists to institute formal disciplinary proceedings. 

(b) The President shall appoint one member 
from the Board to serve with the Executive Direc- 
tor of the Board as the probable cause or investiga- 
tory committee. The probable cause committee 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2348 



PROPOSED RULES 



may be assisted by any attorney retained by the 
Board for the purpose of such investigation, or any 
investigator retained by the Board. 

(O The probable cause committee shall investi- 
gate the complaint referred to it by the Board. 
The committee shall determine whether or not 
there is probable cause to believe that the licensee 
has violated any statute or board rule which would 
justify a disciplinary hearing. If the committee 
determines that such probable cause exists, the 
committee may confer with the licensee in an 
attempt to settle the matter through informal 
means. If the committee and the licensee reach an 
agreement on the disposition of the matter under 
investigation, the committee may cause to be 
drafted a proposed settlement agreement, which 
may include proposed findings of fact, conclusions 
of law, and a consent order, for presentation to 
and consideration by the Board. Such findings of 
fact, conclusions of law, and consent order shall 
be presented to and approved by the licensee 
before they are presented to the Board for consid- 
eration and approval. 

(d) If the probable cause committee and the 
licensee are not able to settle the matter under 
investigation by informal means, the licensee may 



request an administrative hearing pursuant to Rule 
.0002 of this Section or the Board may give notice 
of a disciplinary or contested case hearing, if 
required. 

(el Any Board member who has been appointed 
to a probable cause committee shall not be as- 
signed to make a decision or to make findings of 
fact and conclusions of law in any administrative 
hearing concerning the particular matter on which 
he served on the probable cause committee. Such 
Board member may be called as a witness and may 
give testimony at any administrative hearing 
resulting from such investigation. 

ifi Subsequent to the issuance of a notice of 
hearing, the attorney prosecuting the contested 
case for the Board may not communicate, directly 
or indirectly, in connection with any issue of fact 
of question of law, with any party or his represen- 
tative, including the members of the Board as- 
signed to make a decision or to make findings of 
fact and conclusions of law in the contested case, 
except on notice and opportunity for all parties to 
participate. However, the attorney prosecuting the 
matter for the Board may continue to communicate 
concerning such contested case with the members 



the complaint against the optometrist. He also 
may communicate with the Board members about 
other matters. 

Statutory Authority G.S. 90-117.5: 150B-11: 150B- 
38: 150B-4O. 

rOO©? .0006 WRITTEN ANSWERS TO 
THE NOTICE OF HEARING 

(a) Any party served with a notice of hearing 
may file a written answer Such answer must be 
served on and received by the Board's attorney 
and must be received at the Board's office no later 
than 5 working days prior to the date of hearing. 

(bi If the written answer is submitted in lieu of 
a personal appearance by the party at the hearing, 
the envelope containing the answer must bear the 
notation: "ANSWER IN LIEU OF APPEAR- 
ANCE IN THE CASE OF (name of easel" and the 
official file or reference number of the proceeding. 
The party shall mail the answer in lieu of appear- 
ance by first class mail, postmarked not less than 
ten full days prior to the date set for the hearing. 

(O If the written answer is submitted as a matter 
in support of a personal appearance by the party at 
the hearing, the party shall ensure that the Board 
and all parties to the proceeding receive copies of 
the answer ten full days prior to the date of the 
hearing. 

Statutory Authority G.S. 90-117.5: 150B-38. 

SUBCHAPTER 42M - PRECEPTORSHIPS 

.0001 DEFECTIONS 

(a) A preceptorship is a course of study in 
which students enrolled in a school approved 
pursuant to Rule 21 NCAC 42B .0101 receive p art 
of their clinical training in a private practice 
setting outside the direct confines of the education- 
al institution and whose training is continuing 
under the auspices and overall responsibility of the 
institution in which he is enrolled and under the 
supervision of a preceptor credentialed by the 
institution for which he is acting as a preceptor 
and whose credentials have been approved by the 
board. 

(b) A preceptor is an optometrist, duly licensed 
In the State of North Carolina, credentialed by the 
institution) si for which he is serving as preceptor 
and who has been approved by the Board to act as 



of the probable cause committee who investigated 


such and under whose supervision a preceptee 


such matter, and he may communicate with per- 


serves. 


sons not parties to the contested case who may be 


(ci A preceptee is an individual who is still 


called as witnesses, including the person who filed 


enrolled as a student in a school or college of 


2349 7:20 XORTH CAROLINA REGISTER January 15, 1993 

■ 



PROPOSED RULES 



optometry approved by the Board and whose 
clinical training is continuing under the auspices 
and control of the institution in which he is en- 
rolled and under the personal supervision of the 
preceptor to which he has been assigned by his 
institution. 

(d) An institution is a school or college of 
optometry approved by the Board in accordance 
with Rule 21 NCAC 42B .0101. 

Statutory Authority G. S. 90- 1 15. 1 (3); 90-117. 5. 

.0002 FUNCTION 

(a) Preceptees may perform all functions which 
a duly licensed optometrist may perform under 
Article 6 of Chapter 90 of the North Carolina 
General Statutes, provided that such are performed 
at the direction and under the supervision of the 
preceptor to whom the preceptee is registered; 
provided, however, nothing in this part shall be 
construed to permit a preceptee to prescribe for 
any patient in his own name or prior to the 
patient's chart being reviewed and signed by the 
preceptor. Further, in an instance where a phar- 
maceutical agent is being prescribed, the preceptor 
shall physically examine the patient prior to the 
prescription being authorized and given to the 
patient. 

(b) A preceptee shall wear appropriate identifi- 
cation at aH times when involved in patient care 
that will identify him to patients both by name and 
as a "student". Acceptable terms that would meet 
this requirement include but are not limited to 
"intern", "preceptee", "extern", and "o ptometry 
student". 

(c) Prior to the undertaking of any examination 
of a patient by a preceptee, the patient shall be 
made aware that the care being rendered to him is 
being performed by a student in training and the 
patient's record shall note the patient's consent. 

Statutory Authority G.S. 90-115.1(3); 90-117.5. 

.0003 QUALIFICATIONS 

(a) To qualify for a preceptorship, an individual 
must: 

( 1 ) be a student in good academic standing 
currently enrolled in an optometric 
program leading to a doctorate degree 
in optometry at a school whose 
preceptorship program has been ap- 
proved by the Board; 

(2) submit evidence satisfactory to the 
Board of an educational background 
sufficient to enable the applicant to 



function in a clinical environment; 

(3) be recommended for participation in a 
preceptorship by the dean of the optom- 
etry school or college or his designee; 

(4) be approved and registered by the 
Board . 

(b) Within 60 days of the completion of a 
preceptorship. the institution under whose auspices 
the preceptorship was offered shall furnish the 
Board with an evaluation of the preceptee 's perfor- 
mance in the preceptorship, such evaluation to 
include copies of no fewer than one case report for 
each week the preceptee was engaged in the 
program. 

Statutory Authority G. S. 90-1 15. 1 (3); 90-117. 5. 

.0004 APPLICATION AND REGISTRATION 

(a) An institution establishing a preceptorship 
within the State of North Carolina shall be ap- 
proved by the Board in accordance with Rule 21 
NCAC 42B .0101 and shall: 

(1) notify the Board in writing outlining in 
sufficient detail the educational purpos- 
es of the program, the clinical experi- 
ence they expect the preceptee to gain, 
the supervision and/or protocols that the 
institution, the preceptor and the 
preceptee agree to in order to assure 
safe and effective patient care, the 
standards by which they will credential 
preceptors, the facilities that are re- 
quired and made available by the pre- 
ceptor to the preceptee, the maximum 
and minimum number of weeks a stu- 
dent will be assigned to the same pre- 
ceptor and the means and/or methods 
they use to evaluate the student's per- 
formance in the program. If the Board 
finds that the preceptorship serves the 
educational goals as outlined by the 
institution and patient care and safety 
will not be compromised by lack of 
proper supervision, the Board will 
notify the institution of the approval by 
the Board of their preceptorship pro- 
gram . 

(2) within 30 days of the beginning of each 
academic year furnish the Board with a 
current list of optometrists licensed in 
North Carolina who are recommended 
by the institution to the Board as having 
proper credentials and adequate facili- 
ties to serve as preceptors. If "new" 
preceptors are to be added to the 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2350 



PROPOSED RULES 



institution's preceplorship program after 
the institution has filed the preceptor 
list with the Board, the Board shall be 
notified prior to a preeeptee being 
assigned to a new preceptor. 

(b) To receive Board approval and be registered 
as a preeeptee. the individual must file an applica- 
tion. Form BEO-7. provided by the Board and 
must submit such to the Board complete in every 1 
detail. The application must be accompanied by- 
evidence of educational qualifications as required 
by the Board. 

(c) To receive Board approval and be registered 
as a preceptor, the optometrist must file an appli- 
cation. Form BEO-8. provided by the Board and 
must submit such to the Board complete in every 1 
detail. 

Statutory Authority G.S. 90-115.1(3); 90-117.5. 

.0005 REMUNERATION AND EXPENSES 

The preceptor shall serve as such without remu- 
neration for his services. Any funds given to the 
preeeptee shall be only for reimbursement of 
expenses and subsistence costs. All such funds 
shall be reported by the preceptor on Form BEO-9 
to the Board no later than 30 days after the termi- 
nation of the preceptorship. 

Statutory Authority G.S. 90-115.1(3); 90-117.5. 



intoxicants or drugs to such an extent 
that he is unable to perform as a 
preeeptee to an optometrist; 

(4) that the preeeptee has been convicted in 
any court, state or federal . of any felo- 
ny or other criminal offenses involving 
moral turpitude: 

(5) that the preeeptee has been adjudicated 
a mental incompetent or whose mental 
condition renders him unable to safely 
perform as a preeeptee to an optome- 
trist: or 

(6) the preeeptee otherwise commits any 
act or omission which would subject 
him to discipline under G.S. 90-121 .2 
or under these Rules. 

(c) Approval of a preceptorship shall continue i_n 
effect until terminated by Board or until 30 days 
after written notification of termination is submit- 
ted by the institution to the Board. The approval 
a preceptorship may be terminated, after due 
notice and hearing, for good cause shown or for 
any violation of these Rules. 



Statutory Authority G. S. 90-115.1(3); 90-117.5; 

90-121.2. 



.0006 TERMINATION 

(a) Approval and registration of a preceptor 
shall continue in effect until terminated by the 
Board, by the institution from whom he received 
his credentials as a preceptor or until 30 days after 
written notification of termination is submitted by 
the preceptor to the Board. The approval and 
registration of a preceptor may be terminated, after 
due notice and hearing, for good cause shown or 
for any violation of these Rules. 



(b) The approval of a preeeptee shall be termi- 
nated by the Board no later than 30 days following 
the date of graduation or yvhen. after due notice 
and hearing, the Board shall find: 



(1) 



(I) 



that the preeeptee has held himself out 
or permitted another to represent him as 
a licensed optometrist: 
that the preeeptee has in fact performed 
otherwise than at the direction or under 
the personal supervision of an optome- 
trist licensed by the Board or has been 



13} 


delegated and preformed a task or tasks 

beyond his competence; 

that the preeeptee is a habitual user of 




2351 


7:20 SORTH CAROLINA REGISTER 


January 15, 1993 



LIST OF RULES CODIFIED 



1 he List of Rules Codif 


ed 


is a listing of rules that were filed with OAH in the month indicated. 


Key- 






Citation 


= 


Title, Chapter, Subchapter and Rule(s) 


AD 


= 


Adopt 


AM 


= 


Amend 


RP 


= 


Repeal 


With Chgs 


= 


Final text differs from proposed text 


Eff. Date 


= 


Date rule becomes effective 


Temp. Expires 


" 


Rule was filed as a temporary rule and expires on this date or 180 days 



NORTH CAROLINA ADMINISTRATIVE CODE 



OCTOBER, NOVEMBER 1992 



TITLE 



DEPARTMENT 



TITLE 



DEPARTMENT 



1 


Administration 


16 


2 


Agriculture 


17 


4 


Economic and Community 


19A 




Development 


21 


7 


Cultural Resources 




10 


Human Resources 




1 1 


Insurance 




12 


Justice 




L3 


Labor 




15A 


Environment, Health, 


23 




and Natural Resources 


24 



Education 
Revenue 
Transportation 

Occupational Licensing Boards 
2 - Architecture 
17 - Dietetics/Nutrition 
19 - Electrolysis 
56 - Professional Engineers 

and Land Surveyors 
Community Colleges 
Independent Agencies 
1 - Housing Finance 



Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


1 NCAC 38 .0205 


/ 






/ 


11/02/92 ' 




2 NCAC 34 .0406 


/ 






/ 


11/02/92 




.0603 




/ 




/ 


11/02/92 




.0902 






/ 




11/02/92 




48F .0301 




/ 




/ 


12/01/92 




.0302 




/ 






12/01/92 




4 NCAC IK .0101 


/ 






/ 


12/01/92 




.0102 


/ 








12/01/92 




.0104 -0105 


/ 






/ 


12/01/92 




4 NCAC IK .0201 


/ 






/ 


12/01/92 







7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2352 









LIST OF RULES CODIFIED 








Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


.0202 


/ 








12/01/92 




.0203 


/ 






/ 


12/01/92 




.0301 


/ 






/ 


12/01/92 








.0401 - 


.0402 


/ 






/ 


12/01/92 




.0403 


/ 








12/01/92 




.0404 


/ 






/ 


12/01/92 




.0405 


/ 








12/01/92 






3E 


.0101 






/ 




/ 


01/01/93 




.0106 






/ 




01/01/93 




.0201 




/ 




/ 


01/01/93 




.0204 


/ 








01/01/93 




.0302 




/ 




/ 


01/01/93 




.0601 




/ 




/ 


01 '01/93 




.0603 






/ 




01/01/93 






19L 


.1401 - 


.1405 






/ 




11 '02'92 






19S 


.0101 




/ 








11/30/92 








.0102 - 


.0103 


/ 






/ 


11/30/92 








.0104 - 


.0105 


/ 






/ 


1 1 '02/92 




.0106 


/ 








1 1 02'92 




.0201 


/ 








11/02/92 




.0202 


/ 






/ 


11/30 '92 




.0301 


/ 








11/02/92 




.0401 


/ 






/ 


11/30/92 








.0402 - 


.0404 


/ 






/ 


11 '02'92 








.0501 - 


.0502 


/ 








1 1 '02/92 




.0503 


/ 






/ 


1102 92 








.0601 - 


.0603 


/ 






/ 


1 1 02/92 








.0701 - 


.0704 


/ 






/ 


11/02/92 




.1001 


/ 






/ 


11/02/92 




.1002 


/ 








11/02/92 




.1003 


/ 






/ 


11/02/92 








.1004 - 


.1007 


/ 








11/02/92 




4 


NT AC 19S 


.1008 - 


.1009 


/ 






/ 


11/02/92 







2353 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



LIST OF RULES CODIFIED 





Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


.1101 - .1104 


/ 






/ 


11/02/92 




.1105 - .1107 


/ 








11/02/92 




.1108 - .1110 


/ 






/ 


11/02/92 




7 NCAC 5 .0203 




/ 






01/01/93 




10 NCAC 3R .3001 


/ 






/ 


11/02/92 




.3010 


/ 








11/02/92 




.3020 


/ 






/ 


11/02/92 




.3030 


/ 






/ 


11/02/92 




.3040 


/ 






/ 


11/02/92 




14C .1115 




/ 




/ 


11/02/92 




14K .0216 




/ 




/ 


11/02/92 




14T .0101 


/ 






/ 


11/02/92 




.0102 


/ 








11/02/92 




.0103 - .0104 


/ 






/ 


11/02/92 




15A .0205 




/ 






11/02/92 




.0206 




/ 




/ 


11/02/92 




.0210- .0215 




/ 






11/02/92 




.0216 




/ 




/ 


11/02/92 




.0217 




/ 






11/02/92 




.0218 




/ 




/ 


11/02/92 




.0220 




/ 






11/02/92 




.0223 




/ 






11/02/92 




.0224 
recodified to .0226 










11/03/92 




.0225 
recodified to .0224 










11/03/92 




.0225 




/ 




/ 


11/02/92 




.0226 
recodified to .0225 










11/03/92 




.0226 




/ 




/ 


11/02/92 




.0228 




/ 






11/02/92 




ISA .0125 - .0126 




/ 




/ 


01/04/93 




.0127- .0128 




/ 






01/04/93 




10 NCAC 18A .0130 




/ 






01/04/93 







7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2354 



LIST OF RULES CODIFIED 





Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


.0132 - .0133 




/ 






01/04/93 




.0135 




/ 






01/04/93 




18D .0117 




/ 




/ 


11/02/92 




.0119 




/ 




/ 


11/02/92 




.0127 


/ 








11/02/92 




26B .0109 




/ 






11/02/92 




26D .0016 




/ 




/ 


02/01/93 




26H .0102 




/ 






01/01/93 




.0204 




/ 






12/01/92 




.0206 




/ 






12/01/92 




.0303 




/ 






01/01/93 




35 D .0201 




/ 




/ 


11/02/92 




35E .0309 




/ 




/ 


12/01/92 




41 E .0514 




/ 






10/14/92 


180 DAYS 


41G .0602 




/ 






10/14/92 


180 DAYS 


.1102 




/ 






10/14/92 


180 DAYS 


41 R .0003 




/ 






10/14/92 


180 DAYS 


42C .2401 




/ 






10/14/92 


180 DAYS 


.3402 




/ 






12/01/92 




.3601 


/ 






/ 


12/01/92 




42T .0001 




/ 




/ 


12/01/92 




.0003 




/ 






12/01/92 




.0006 


/ 








12/01/92 




46C .0105 






/ 




12/01/92 




.0107 




/ 






12/01/92 




46H .0110 


/ 






/ 


12/01/92 




.0304 




/ 






12/01/92 




47B .0305 




/ 




/ 


11/02/92 




1 1 NCAC 3 .0002 






/ 




12/01/92 




.0005 - .0008 






/ 




12/01/92 




11 A .0601 


/ 








12/01/92 




.0603 - .0608 


/ 








12/01/92 




11 NCAC 11A .0609 


/ 






/ 


12/01/92 







( 



2355 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



LIST OF RULES CODIFIED 





Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


12 .1002 




/ 






12/01/92 




.1004 




/ 






12/01/92 




.1006 




/ 






12/01/92 




.1008 




/ 






12/01/92 




.1009 - .1010 




/ 




/ 


12/01/92 




.1017 


/ 








12/01/92 




.1018 - .1019 


/ 






/ 


12/01/92 




.1020 - .1021 


/ 








12/01/92 




12 NCAC 4G .0201 




/ 






12/01/92 




8 .0103 - .0105 




/ 






11/02/92 




.0109 


/ 








11/02/92 




.0204 


/ 








11/02/92 




.0506 


/ 






/ 


11/30/92 




10B .0103 




/ 




/ 


01/01/93 




.0106 




/ 






01/01/93 




.0203 




/ 






01/01/93 




.0204 




/ 




/ 


01/01/93 




.0205 




/ 






01/01/93 




.0206 




/ 




/ 


01/01/93 




.0301 




/ 






01/01/93 




.0303 




/ 






01/01/93 




.0304 - .0305 




/ 




/ 


01/01/93 




.0307 




/ 






01/01/93 




.0401 




/ 






01/01/93 




.0404 




/ 






01/01/93 




.0406 




/ 




/ 


01/01/93 




.0408 - .0409 




/ 




/ 


01/01/93 




.0505 




/ 




/ 


01/01/93 




.0507 




/ 




/ 


01/01/93 




.0603 




/ 




/ 


01/01/93 




.0605 




/ 






01/01/93 




.0911 - .0912 


/ 






/ 


01/01/93 




12 NCAC 4G .2101 




/ 




/ 


01/01/93 







7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2356 



LIST OF RULES CODIFIED 





Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


.2102 - .2104 




/ 






01/01/93 




.2105 




/ 




/ 


01/01/93 




1 1 .0203 




/ 






10/06/92 


ISO DAYS 


.0302 




/ 






10/06/92 


180 DAYS 


13 NCAC 7C .0101 - .0102 




/ 






02/08/93 




.0108 


/ 






/ 


10/22/92 




.0109 


/ 








10/22/92 




15A NCAC 1C .0504 




/ 






12 '07/92 


180 DAYS 


IK .0101 - .0102 


/ 








12/01/92 




.0103 


/ 






/ 


12/01/92 




.0201 - .0202 


/ 








12/01/92 




.0301 - .0305 


/ 






/ 


12/01/92 




.0401 


/ 






/ 


12/01/92 




.0402 - .0404 


/ 








12/01/92 




2B .0216 




/ 




/ 


12/01/92 




.0309 




/ 




/ 


12/01/92 




.0312 




/ 




/ 


12/01/92 




2C .0101 




/ 






12/01/92 




.0102 - .0103 




/ 




/ 


12/01/92 




.0105 




/ 




/ 


12/01/92 




.0107 - .0111 




/ 




/ 


1201/92 




.0112 - .0114 




/ 






12/01/92 




.0116 




/ 






12/01/92 




.0118 - .0119 




/ 






12/01/92 




2D .0103 




/ 




/ 


12/01 92 




.0104 




/ 






12/01/92 




.0401 




/ 






12/01/92 




.0521 




/ 






12/01/92 




.0524 




/ 




/ 


12/01/92 




.0525 




/ 






12/01/92 




.0530 - .0531 




/ 






12/01/92 




.0532 




/ 




/ 


12/01/92 




15A NCAC 2D .0926 




/ 




/ 


05/01/93 







( 



2357 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



LIST OF RULES CODIFIED 





Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


.0927 




/ 




/ 


12/01/92 




2H .0603 




/ 




/ 


12/01/92 




.0607 




/ 




/ 


12/01/92 




.0609 - .0610 




/ 




/ 


12/01/92 




.0801 - .0804 




/ 




/ 


11/02/92 




.0806 - .0807 




/ 




/ 


11/02/92 




.0808 




/ 






11/02/92 




.0809 - .0810 




/ 




/ 


11/02/92 




2L .0107 




/ 




/ 


11/02/92 




2M .0201 




/ 






11/02/92 




7H .0208 




/ 




/ 


11/30/92 




.0305 




/ 




/ 


12/01/92 




.0310 




/ 






12/01/92 




7 J .0604 


/ 








11/30/92 




10A .1001 




/ 




/ 


11/02/92 




10F .0323 




/ 




/ 


12/01/92 




16A .0401 






/ 




12/01/92 


180 DAYS 


.1101 - .1108 


/ 








12/01/92 


180 DAYS 


.1150 - .1151 


/ 








12/01/92 


180 DAYS 


.1201 - .1209 


/ 








12/01/92 


180 DAYS 


16 NCAC 6C .0201 - .0202 




/ 




/ 


12/01/92 




.0205 - .0206 




/ 






12/01/92 




17 NCAC 5B .1112 




/ 






11/02/92 




5C .0102 




/ 






11/02/92 




.0407 


/ 








11/02/92 




.0604 




/ 






11/02/92 




.2003 




/ 






11/02/92 




19A NCAC 2B .0164 - .0165 




/ 




/ 


1 1 /02/92 




2D .0822 




/ 






12/01/92 




.0824 




/ 






12/01/92 




2E .0219 




/ 






12/01/92 




.0221 




/ 






12/01/92 




21 NCAC 2 .0108 




/ 




/ 


12/01/92 







7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2358 



LIST OF RULES CODIFIED 





Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


.0301 - .0302 




/ 






12/01/92 




17 .0016 


/ 






/ 


11/30/92 




19 .0102 


/ 








12/01/92 




56 .0501 - .0503 




/ 




/ 


11/02/92 




.0601 




/ 






11/02/92 




.0603 




/ 




/ 


11/02/92 




.0701 




/ 




/ 


11/02/92 




.1603 - .1604 




/ 




/ 


11/02/92 




.1605 - .1607 


/ 






/ 


11/02/92 




23 NCAC 2D .0325 - .0326 




/ 






10/15/92 


180 DAYS 


2E .0402 




/ 






10/15/92 


180 DAYS 


.0602 




/ 






10/15/92 


180 DAYS 


24 NCAC 1M .0101 




/ 






11/02/92 




.0201 




/ 






11/02/92 




.0203 




/ 






11/02/92 




.0304 - .0305 


/ 








11/02/92 




.0406 


/ 








11/02/92 




10 .0101 - .0102 


/ 






/ 


11/30/92 




.0201 - .0203 


/ 






/ 


11/30/92 





( 



2359 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



RRC OBJECTIONS 



1 he Rules Review Conmiission (RRC) objected to the following rules in accordance with G.S. 
143B-30.2(c). State agencies are required to respond to RRC as provided in G.S. 143B-30.2(d). 



COMMERCE 
Departmental Rules 

4 NCAC IK .0103 - Eligible Applicants 

Agency Revised Rule 
4 NCAC IK .0204 - Discretionary Public Hearing by the Department 

Agency Revised Rule 
4 NCAC IK .0205 - Formal Application Procedures: Approval 

Agency Revised Rule 
4 NCAC IK .0206 - Formal Application Procedures: Denial 

Agency Revised Rule 
4 NCAC IK .0207 - Reimbursement of Extraordinary Expense 

Agency Revised Rule 
4 NCAC IK .0302 - Criteria for Making Necessary Findings 

Agency Revised Rule 

ENVIRONMENT, HEALTH, AND NATURAL RESOURCES 

Coastal Management 

15 A NCAC 7H .0308 - Specific Use Standards for Ocean Hazard Areas 
Rule Returned to Agency 

Environmental Management 

15 A NCAC 2H .0805 - Certification and Renewal of Certification 
Agency Revised Rule 
Rule Returned to Agency 
Agency Filed with OAH 

Governor's Waste Management Board 

15A NCAC 14C .0005 - Conditions for Grants 
Agency Revised Rule 

Solid Waste Management 

15A NCAC 13B .0103 - General Conditions 
Agency Revised Rule 

Wildlife Resources and Water Safety 

15 A NCAC 101 .0001 - Definitions 
Agency Responded 
Agency Responded 

HUMAN RESOURCES 



RRC Objection 
Obj. Removed 
RRC Objection 
Obj. Removed 
RRC Objection 
Obj. Removed 
RRC Objection 
Obj. Removed 
RRC Objection 
Obj. Removed 
RRC Objection 
Obj. Removed 



11/19/92 
12/17/92 
11/19/92 
12/17/92 
11/19/92 
12/17/92 
11/19/92 
12/17/92 
11/19/92 
12/17/92 
11/19/92 
12/17/92 



RRC Objection 11/19/92 
12/17/92 



RRC Objection 10/15/92 

RRC Objection 10/15/92 

11/19/92 

Eff. 12/21/92 



RRC Objection 12/17/92 
Obj. Removed 12/17/92 



RRC Objection 1 2/1 7/92 
Obj. Removed 12/17/92 



RRC Objection 10/15/92 
No Action 11/19/92 

No Action 12/17/92 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2360 



RRC OBJECTIONS 



Medical Assistance 



10 NCAC 26D .0012 - Time Limitation 

Agency Withdrew Rule 
10 NCAC 26N .0201 - Offer to Counsel 

Agency Withdrew Rule 



RR C Ojbection 12/1 7/92 
12/17/92 

RRC Objection 12117/92 
12/17/92 



Mental Health: General 



10 NCAC 14K .0103 - Definitions 
Agency Revised Rule 



RRC Objection 
Obj. Removed 



12/17/92 
12/17/92 



INDEPENDENT AGENCIES 



N.C. Housing Finance Agency 



24 NCAC 1M .0202 - Eligibility 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0204 - Selection Procedures 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0205 - Administration 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0206 - Program Fees- 
No Response from Agency 

No Response from Agency 
24 NCAC IM .0301 - Goal and Objectives 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0302 - Eligibility Requirements 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0303 - Threshold Review Criteria 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0306 - Funding Commitment 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0401 - Goals and Objectives 

No Response from Agency- 
No Response from Agency 
24 NCAC IM .0402 - Eligibility Requirements 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0403 - Threshold Review Criteria 

No Response from Agency 

No Response from Agency 
24 NCAC IM .0404 - Ranking Criteria 

No Response from Agency- 
No Response from Agency 
24 NCAC IM .0405 - Agency Board Approval 

No Response from Agency 

No Response from Agency 



RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 
RRC Objection 
No Action 
No Action 



10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12H7/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 
10/15/92 
11/19/92 
12/17/92 



2361 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



RRC OBJECTIONS 



INSURANCE 

Agent Services Division 

11 NCAC 6A .0802 - Licensee Requirements 
Agency Revised Rule 

Departmental Rules 

11 NCAC 1 .0432 - Manufactured Housing Board Hearings 
Agency Withdrew Rule 

Financial Evaluation Division 

11 NCAC 11 A .0602 - Licensure 
Agency Revised Rule 
Rule Returned to Agency 

Multiple Employer Welfare Arrangements 

11 NCAC 18 .0019 - Description of Forms 

Seniors' Health Insurance Information Program 

11 NCAC 17 .0005 - SH1IP Inquiries to Insurers and Agents 

LICENSING BOARDS AND COMMISSIONS 

Architecture 

Cosmetic Art Examiners 

21 NCAC 14L .0301 - Applicants Licensed as Teachers in Other States 

Agency Revised Rule 
21 NCAC 14L .0302 - Requirements for Obtaining a Teacher's License 

Agency Revised Rule 

General Contractors 

21 NCAC 12 .0901 - Definitions 

Agency Revised Rule 
21 NCAC 12 .0908 - Order Directing Payment from Fund 

Agency Revised Rule 
21 NCAC 12 .0910 - Limitations; Pro Rata Distribution 

REVENUE 

Individual Income, Inheritance and Gift Tax Division 

17 NCAC 3B .0401 - Penalties 
17 NCAC 3B .0402 - Interest 

Individual Income Tax Division 

17 NCAC 6B .0107 - Extensions 



RRC Objection 12/17/92 
Obj. Removed 12/17/92 



RR C Objection 1 2/1 7/92 
12/17/92 



RR C Objection 11/1 9/92 

RRC Objection 11/19/92 

12/17/92 



RRC Objection 06/18/92 



RRC Objection 06/18/92 



RRC Objection 11/19/92 

Obj. Removed 12/17/92 

RR C Objection 1 1 II 9/92 

Obj. Removed 12/17/92 



RRC Objection 12/17/92 

Obj. Removed 12/17/92 

RRC Objection 12/17/92 

Obj. Removed 12/17/92 

RRC Objection 12/17/92 



RRC Objection 08/20/92 
RRC Objection 08/20/92 



RRC Objection 08/20/92 



7:20 



NORTH CAROLINA REGISTER 



January IS, 1993 



2362 



RRC OBJECTIONS 



17 NCAC 6B .0115 - Additions to Federal Taxable Income 
1 7 NCA C 6B .01 16 - Deductions from Federal Taxable Income 
1 7 NCA C 6B .0117 - Transitional Adjustments 
1 7 NCA C 6B . 3406 - Refunds 



RRC Objection 
RRC Objection 
RRC Objection 
RRC Objection 



08/20/92 
08/20/92 
08/20/92 
08/20/92 



I 



2363 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



RULES INVALIDATED BY JUDICIAL DECISION 



1 his Section of the Register lists the recent decisions issued by the North Carolina Supreme Court, 
Court of Appeals, Superior Court (when available), and the Office of Administrative Hearings which 
invalidate a rule in the North Carolina Administrative Code. 



1 NCAC 5A .0010 - ADMINISTRATIVE PROCEDURES 

Thomas R. West, Administrative Law Judge with the Office of Administrative Hearings, declared two portions 
of Rule 1 NCAC 5A .0010 void as applied in Stauffer Information Systems, Petitioner v. Vie North Carolina 
Department of Community Colleges and Tlw North Carolina Department of Administration, Respondent and 
Tfie University of Southern California, Intervenor-Respondent (92 DOA 0666). 

15A NCAC 19A .0202(d)(10) - CONTROL MEASURES - HIV 

Brenda B. Becton, Administrative Law Judge with the Office of Administrative Hearings, declared Rule 15A 
NCAC 19A .0202(d)( 10) void as applied in ACT-UP TRIANGLE (AIDS Coalition to Unleash Power Triangle), 
Steven Harris, and John Doe, Petitioners v. Commission for Health Services of the State of North Carolina, 
Ron Levine, as Assistant Secretary of Health and State Health Director for the Department of Environment, 
Health, and Natural Resources of the State of North Carolina, William Cobey, as Secretary of the Department 
of Environment, Health, and Natural Resources of the State of North Carolina, Dr. Rebecca Meriwether, as 
Chief, Communicable Disease Control Section of the North Carolina Department of Environment , Health, and 
Natural Resources, Wayne Bobbin Jr. , as Chief of the HIV/STD Control Branch of the North Carolina 
Department of Environment , Health, and Natural Resources, Respondents (91 EHR 0818). 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2364 



CONTESTED CASE DECISIONS 



1 his Section contains the full text of some of the more significant Administrative Law Judge decisions 
along with an index to all recent contested cases decisions which are filed under North Carolina 's 
Administrative Procedure Act. Copies of the decisions listed in the index and not published are available 
upon request for a minimal charge by contacting the Office of Administrative Hearings, (919) 733-2698. 



KEY TO CASE CODES 



ABC Alcoholic Beverage Control Commission DST 

BDA Board of Dental Examiners EDC 

BME Board of Medical Examiners EHR 

BMS Board of Mortuary' Science 

BOG Board of Geologists ESC 

BON Board of Nursing HAF 

BOO Board of Opticians HRC 

CFA Commission for Auctioneers 1ND 

COM Department of Economic and Community INS 

Development LBC 

CPS Department of Crime Control and Public Safety MLK 

CSE Child Support Enforcement NHA 

DAG Department of Agriculture OAH 

DCC Department of Community Colleges OSP 

DCR Department of Cultural Resources PHC 

DCS Distribution Child Support 

DHR Department of Human Resources POD 

DOA Department of Administration SOS 

DOJ Department of Justice SPA 

DOL Department of Labor 

DSA Department of State Auditor WRC 



Department of State Treasurer 
Department of Public Instruction 
Department of Environment, Health, and 
Natural Resources 
Employment Security Commission 
Hearing Aid Dealers and Fitters Board 
Human Relations Committee 
Independent Agencies 
Department of Insurance 
Licensing Board for Contractors 
Milk Commission 

Board of Nursing Home Administrators 
Office of Administrative Hearings 
Office of State Personnel 
Board of Plumbing and Heating 
Contractors 

Board of Podiatry Examiners 
Department of Secretary of State 
Board of Examiners of Speech and Language 
Pathologists and Audiologists 
Wildlife Resources Commission 



CASE NAME 


CASE 
NUMBER 


ALJ 


FILED 
DATE 


Midway Grading Company, Inc. 

v. 
EHR, Division of Land Resources 


90 EHR 0742 


Morrison 


12/23/92 


Eula C. Holloway 

v. 

NC A & T St University. Technology Education Dept 


90 OSP 1377 


Becton 


12/21/92 


Mary Carraway Johnson 

v. 

Department of State Treasurer, Retirement Systems Div 


91 DST 1450 


Chess 


12/23/92 


Thomas Leon Atkinson 

v. 

Criminal Justice Ed & Training Standards Commission 


92 DOJ 0279 


Nesnow 


12/14/92 



2365 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



CONTESTED CASE DECISIONS 



CASE NAME 


CASE 
NUMBER 


ALJ 


FILED 
DATE 


Alcoholic Beverage Control Commission 

v. 

A & W One Stop, Inc., T/A One Stop 


92 ABC 0836 


Becton 


12/21/92 


Alcoholic Beverage Control Commission 

v. 

Partnership, T/A Hawks Landing 


92 ABC 0839 


Becton 


12/21/92 


C. V. Tatem 

v. 

Division of Marine Fisheries 


92 EHR 0923 


Reilly 


12/29/92 


Lionel J. Randolph 

v. 

Department of Human Resources 


92 OSP 0985 


Gray 


12/28/92 


Laura Harvey Williams 

v. 

DHR, Division of Facility Services 


92 DHR 1191 


Nesnow 


12/31/92 


Lesa Gasque, on behalf of Michael Norman, Guilford 

County Department of Social Services, on behalf of 

Michael Norman, and Nexus Willie M. Program, on behalf 

of Michael Norman 

v. 

Guilford County Board of Education 


92 EDC 1227 


Mann 


12/31/92 


Daoud Mohammad Abu-Ghannan 

v. 

EHR, Division of Maternal & Child Health, Nutrition 

Services Section 


92 EHR 1351 


Morgan 


12/28/92 


Myra Aliese Johnson & Alvin Eugene Johnson 

v. 

Mecklenburg County Department of Social Services 


92 DHR 1435 


Reilly 


12/22/92 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2366 



CONTESTED CASE DECISIONS 



STATE OF NORTH CAROLINA 



COUNTY OF GUILFORD 



IN THE OFFICE OF 
ADMINISTRATTVE HEARINGS 

90 OSP 1377 



El LA C. HOLLOVVAY, 
Petitioner. 

v. 

NORTH CAROLINA A & T STATE UNIVERSITY. 
TECHNOLOGY EDUCATION DEPARTMENT. 
Respondent. 



RECOMMENDED DECISION 



This matter was heard before Brenda B. Becton, Administrative Law Judge, on September 29, 1992. 
in High Point, North Carolina. At the conclusion of the hearing, the parties were afforded an opportunity to 
submit written submissions. The record was closed on October 29. 1992. The undersigned requested and 
was granted an extension of time until December 21. 1992 to file the Recommended Decision in this matter. 

APPEARANCES 

Petitioner: Christopher G. Harper. Attorney. Durham. 

North Carolina. 

Respondent: Thomas J. Ziko, Special Deputy Attorney 

General, North Carolina Department of Justice, Raleigh, North Carolina. 

ISSUES 

1. Did the Respondent have just cause to discharge the Petitioner from her position as Secretary III? 

2. Did the Respondent discriminate against the Petitioner on the basis of her race or sex when it 
discharged her from her position as a Secretary III? 

3. Is the Petitioner a qualified handicapped person, as a result of her on the job injury, for the purpose 
of performing the duties of a Secretary III in the Respondent's Technology Education Department? 

4. Did the Respondent discriminate against the Petitioner on the basis of her handicap when it discharged 
her from her position as a Secretary III? 

MOTION TO DISMISS 

At the conclusion of the Petitioner's presentation of evidence, the Respondent's motion to dismiss the 
Petitioner's allegations of sexual and racial discrimination was granted by the undersigned in open court. 

FINDINGS OF FACT 

From official documents in the file, sworn testimony of the witnesses, and other competent and 
admissible evidence, it is found as a fact that: 

1 . The Petitioner was employed as a Secretary III by the Respondent. The Petitioner's immediate 

supervisor was Dr. Robert Pyle. The Petitioner began working for Dr. Pyle in May. 1989. 



2367 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



CONTESTED CASE DECISIONS 



2. The Petitioner had 13 years of prior employment with the Respondent. 

3. The Petitioner sustained an on the job injury in April, 1990 when a large bookcase fell on her while 
she was retrieving supplies from a cabinet. As a result of the injuries she sustained, the Petitioner 
was unable to return to work for a period of five months. 

4. Her work history prior to her injury was impeccable, and her performance evaluations were excellent. 

5. The Petitioner performed tasks beyond the scope of her job description and was highly praised by Dr. 
Pyle prior to her on the job injury on April 16, 1990. 

6. The Petitioner received a 10% disability rating to her left arm, and a 25% permanent disability rating 
to her back as a result of her accident. The Petitioner's disabilities left her unable to lift packages 
in excess of 10 pounds, and the Petitioner was restricted from sitting or standing for extended periods 
of time. 

7. During her period of recuperation, the Petitioner received several calls from her supervisor, Dr. 
Robert Pyle inquiring about when she would be able to return to work. During this same time period, 
the Petitioner received a letter dated May 30, 1990 from the Respondent directing her not to return 
to work until she achieved a 100% recovery. 

8. The Respondent's actions led the Petitioner to believe that her job was in jeopardy. Therefore, the 
Petitioner contacted the Greensboro Human Relations Commission on June 22, 1990 and expressed 
her concerns to Ms. Yolanda LeaCraft. Ms. LeaCraft documented their discussions and suggested 
that the Petitioner contact either the State Personnel Office or the Personnel Office at N.C. A & T 
State University for advice. 

9. The Petitioner returned to work on September 10, 1990. At that time, the duties of the Petitioner's 
Secretary III position were being performed by a temporary employee, Patricia Posey. The Petitioner 
was assigned to the Chancellor's office until Ms. Posey vacated the Secretary III position in the 
Technology Education Department. 

10. The Petitioner worked in the Chancellor's office for one week before being transferred back to the 
Secretary III position in the School of Technology during the week of September 17, 1990. 

1 1 . When the Petitioner returned to work in the School of Technology Education, she was informed of 
some changes which had been implemented during her absence and was given new instructions 
regarding her job duties by Dr. Pyle. 

12. Dr. Pyle met with the Petitioner on September 17, 1990 and informed her that the current office 
hours were from 8:00 a.m. to 5:00 p.m. Dr. Pyle discussed the need to turn in time sheets in a 
timely manner and other aspects of her job. Dr. Pyle's notes indicate that he informed the Petitioner 
that a "weeks notice" was required for annual leave. This notation does not, however, appear to the 
undersigned to have been made at the same time the other notes were made. 

13. On September 20, 1990, the Petitioner became ill while at work. Because Dr. Pyle was out of the 
office, she left him a note informing him that she had become ill and was going home and that she 
would be in the next day if she felt better. 

14. The Petitioner missed a half of day of work on September 20, 1990 and she did not work at all on 
September 21, 1990. 

15. The Petitioner did not call in sick on September 21, 1990. 

16. On October 1, 1990, the Petitioner presented Dr. Pyle a written request for two hours of annual leave 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2368 



CONTESTED CASE DECISIONS 



from 9:45 a.m. to 1 1:45 a.m. There is no evidence that Dr. Pyle denied the Petitioner's request on 
the basis that she had failed to make the request one week in advance. 

17. On October 2. 1990, Dr. Pyle met with the Petitioner to discuss areas of concern and issued the 
Petitioner an oral warning. The areas of concern discussed were: 1) Playing of radio, 2) Personal 
reading materials left on the Petitioner's desk, 3) Office management skills, 4) Petitioner's abruptness 
when reassigned work, and 5) Typing errors and proofreading work. 

18. The Petitioner became upset during the October 2, 1990 conference with Dr. Pyle and accused him 

ot [licking on hei . 

19. Ihe Petitioner began to feel uneasj about her job and contacted the Dean of the School of Technology 
Education, Dr. Earl G. Yarborough, to request a meeting to discuss her status. 

20. Dr. Pyle also contacted Dr. Yarborough about the problems he and the Petitioner were having. 

21. On October 10. 1990. Dr. Yarborough met with the Petitioner and Dr. Pyle. They discussed many 
of the areas of concern that Dr. Pyle and the Petitioner had covered on October 2. 1990. including 
the Petitioner's "taking time off from work without notifying supervisor." 

22. On October 17. 1990, the Petitioner called in to work to inform Dr. Pyle that she was having problem 
with her arm and her doctor had advised that she stay out of work for a few days. 

23. On October 31. 1990. the Petitioner requested annual leave for the next day, November 1, 1990. The 
Petitioner typed her request and placed it in Dr. Pyle's incoming mail box since he was out of the 
office. Dr. Pyle received the Petitioner's annual leave request on October 31 , 1990 at approximately 
5:15 p.m. When the Petitioner reported for work on November 2. 1990. she learned that her request 
for leave on November 1, 1990 had not been approved. 

24. In the note denying her request for annual leave. Dr. Pyle informed the Petitioner that she must 
request annual leave at least three days before the date the for which leave is being requested. 

25. The Petitioner followed the procedure for requesting leave that she had become accustomed to 
following prior to her on the job injury and the procedure that she thought was routine university 
practice for requesting leave time. 

26. The Petitioner was informed by way of the State Employees Handbook, 1990, page 16, that requests 
for leave must be approved by her supervisor. 

27. The Petitioner did not receive prior approval for the annual leave day she took on November 1 , 1990. 

28. Ms. Patricia Posey, the secretary hired during the Petitioner's absence, was present on November 1, 
1990 and able to handle the Department of Education Technology's office operations. 

29. On Monday, November 5, 1990 at approximately 2:30 p.m.. Dr. Pyle notified the Petitioner that she 
was to meet with him for a Pre-Dismissal Conference at 3:00 p.m. and she would be dismissed at the 
end of the day unless she provided him some reason not to proceed with her termination. 

30. The Petitioner responded to the notice of the Pre-Dismissal conference by writing Dr. Pyle a 
memorandum in which she stated that under the circumstances, she did not wish to meet with him and 
that she would consider herself already dismissed. 

3 1 . Dr. Pyle wrote the Petitioner a letter dated November 5, 1990 notifying her that "On the basis of your 

behavior on October 3 1 , 1990, failure to receive approval from your supervisor prior to taking annual 
leave, I am hereby notifying you that your services are not (sic) longer needed in the Department of 



2369 7:20 NORTH CAROLINA REGISTER January 15, 1993 



CONTESTED CASE DECISIONS 



Technology Education." 
32. The letter terminating the Petitioner's employment did not inform her of her appeal rights. 

Based on the foregoing Findings of Fact, the undersigned Administrative Law Judge makes the following: 

CONCLUSIONS OF LAW 

1. North Carolina General Statutes section 126-35 provides that no permanent employee subject to the 
State Personnel Act shall be discharged, suspended or reduced in pay or position, except for just 
cause. 

2. The determination of whether just cause exists involves both substantive and procedural questions. 
Causes for dismissal fall into two categories: (1) discipline imposed on the basis of job performance 
which requires progressive warnings, and (2) discipline imposed on the basis of personal conduct 
detrimental to state service which requires no prior warnings. 

3. Before an employee can be discharged, suspended or reduced in pay or position, the employee must 
be furnished with a statement in writing setting forth in numerical order the specific acts or omissions 
that are the reasons for the disciplinary action and the employee's appeal rights. 

4. The Petitioner was a permanent employee of the Respondent subject to the State Personnel Act. 

5. According to the State Personnel Manual, the job performance category covers performance related 
inadequacies for which a reasonable person would expect to be notified of and allowed an opportunity 
to improve, and the personal conduct category covers those actions for which no reasonable person 
could, or should, expect to receive prior warnings. 

6. Insubordination is the refusal to accept or to obey a reasonable and proper assignment from an 
authorized supervisor. As such, insubordinate conduct falls within the discipline for personal conduct 
category which does not require any prior warning. The term insubordination implies the existence 
of a willful or intentional disregard of the reasonable instructions of the employer. 

7. There is evidence that the Petitioner was instructed that she was not to take time off without 
"notifying" her supervisor. Notify means to give notice to or to inform. 

8. The Petitioner notified her supervisor of her intention to take annual leave on November 1, 1990. 
Thus, she complied with the instructions she had been given and the office procedure in place up until 
that time. 

9. Other than the statement that leave must be approved by a supervisor that is found in the State 
Employees' Handbook, there is no evidence that the Petitioner was instructed prior to November 2, 
1990 that she had to have her leave requests approved three days in advance. The notation about 
leave in Dr. Pyle's notes of the September 17, 1990 meeting conflicts with the directive given to the 
Petitioner on November 2, 1990 and was, in the opinion of the undersigned added to his notes 
sometime after September 17, 1990. This conclusion is buttressed by the fact that Dr. Pyle 
apparently approved the Petitioner's request for annual leave on October 1. 1990 and did not, at that 
time, comment on the fact that the Petitioner had not presented her request one week in advance. 

10. There is no evidence that the Petitioner willfully or intentionally disregarded instructions given to her 
by her supervisor. Therefore, her behavior cannot be classified as insubordination, the type of 
conduct for which one should not expect to receive a warning. 

1 1 . The rules promulgated by the State Personnel Commission and codified at 25 NCAC IE .202 require 

that annual "leave shall be taken only upon authorization of the agency head." 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2370 



CONTESTED CASE DECISIONS 



12. The Petitioner's request for leave on November 1, 1990 was not approved by her supervisor. 
Therefore, she violated the provisions of 25 NCAC IE .0202. If the Respondent's practice has been 
and is to strictly enforce the provisions of 25 NCAC IE .0202 by requiring prior approval, the 
Petitioner should have received a warning that her conduct was unacceptable and she should have 
been afforded an opportunity to comply with the standard of conduct required by her employer. 

13. The Petitioner's situation was not one where she was denied requested leave and she then knowingly 
and willfully failed to report to work knowing that her request for leave had been denied. 

14. Since the Petitioner's conduct was not insubordination, the Respondent did not have just cause to 
dismiss the Petitioner from her employment. Her conduct was. at most a performance inadequacy 
which required that she receive the requisite number of warnings prior to dismissal. 

15. The Respondent failed to inform the Petitioner of her appeal rights as required by North Carolina 
General Statutes section 126-35. Pursuant to the regulations codified at 25 NCAC IB .0432, failure 
to give written notice of applicable appeal rights in connection with a dismissal is a procedural defect 
the sole remedy for which is an extension of the time in which to file an appeal. The Petitioner's 
Petition for A Contested Case Hearing was timely filed and no other remedy is available for this 
violation. 

16. Since the undersigned has found that the Petitioner did not receive the requisite number of warnings 
to merit dismissal for performance based inadequacies, it is not necessary to reach the Petitioner's 
allegations that her dismissal constituted discrimination of the basis of a handicapping condition. 

RECOMMENDED DECISION 

The State Personnel Commission will make the Final Decision in this contested case. It is 
recommended that the Commission adopt the Findings of Fact and Conclusions of Law set forth above and 
reinstate the Petitioner in a comparable grade position. In addition the Petitioner should be awarded 
backwages and reasonable attorney fees. 

ORDER 

It is hereby ordered that the agency serve a copy of the Final Decision on the Office of Administrative 
Hearings. P.O. Drawer 27447, Raleigh. N.C. 27611-7447, in accordance with North Carolina General 
Statutes section 150B-36(b). 

NOTICE 

Before the State Personnel Commission makes the FINAL DECISION, it is required by North 
Carolina General Statutes section 150B-36(a) to give each party an opportunity to file exceptions to this 
RECOMMENDED DECISION, and to present written arguments to those in the agency who will make the 
final decision. 

The agency is required by North Carolina General Statutes section 150B-36(b)to serve a copy of the 
Final Decision on all parties and to furnish a copy to the Parties' attorney of record. 

This the 21st day of December, 1992. 



Brenda B. Becton 
Administrative Law Judge 



2371 7:20 NORTH CAROLINA REGISTER January 15, 1993 



CONTESTED CASE DECISIONS 



STATE OF NORTH CAROLINA 



COUNTY OF GUILFORD 



IN THE OFFICE OF 
ADMINISTRATIVE HEARINGS 

91 DST 1450 



MARY CARRAWAY JOHNSON, 
Petitioner, 



v. 



N.C. DEPARTMENT OF STATE TREASURER, 
RETIREMENT SYSTEMS DDVISION, 
Respondent. 



RECOMMENDED DECISION 



This matter came on for hearing on August 17, 1992, in High Point, North Carolina before 
Administrative Law Judge Sammie Chess, Jr. The record closed an November 6, 1992, when the Petitioner 
completed findings of facts. 

ISSUES 

1. Has the Respondent properly calculated the amount of Petitioner's benefits under the retirement 
plan she elected, or, has Respondent provided Petitioner with the actuarial equivalent of available benefits 
under the plan she elected when compared to other benefit plans? 

2. If her benefits were not properly calculated, or, if she has not received the actuarial equivalent 
of benefits under the plan she elected, what benefit amount should she now receive? 

STATUTES AND RULES INVOLVED 

1. North Carolina General Statute Section 135-5(g) 

APPEARANCES 

Petitioner: S. Luke Largess 

FERGUSON, STEIN, WATT, WALLAS, ADKINS and GRESHAM, P. A. 
Suite 730, East Independence Plaza, 700 East Stonewall Street, 
Charlotte, North Carolina 



Respondent: Alexander McC. Peters 

Associate Attorney General 

North Carolina Department of Justice 

Post Office Box 629 

Raleigh, North Carolina 

WITNESSES 

Mary Carraway Johnson, Petitioner 



For Petitioner: 
For Respondent: 



Timothy S. Bryan, Chief of Member Services, 
Teachers' and State Employees Retirement System 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2372 



CONTESTED CASE DECISIONS 



The parties entered the following: 

STIPULATIONS 

1 . That all exhibits have been shared by the parties and that all are admissible as to authenticity, 
but exceptions as to relevance are reserved. 

2. That Petitioner began receiving retirement benefits on July 1. 1976. under option 4 of the 
Respondent's various benefit options. 

EXHIBITS 

Editor's Note: The listing of exhibits was omitted from the Register publication. A copy may be obtained 

at a minimum charge by contacting the Office of Administrative Hearings. 

FLNDLNGS OF FACT 

1. Adequate Notice of Hearing was given and received by the parties. 

2. Petitioner retired from public school teaching in North Carolina in 1976. Petitioner was 58 years 
old at the time of her retirement and had 24 years of creditable service. 

3. Before electing among the various benefit plans provided by Respondent. Petitioner traveled to 
Raleigh. North Carolina and met with a benefits counselor employed by the Respondent. The benefits 
counselor's job involved explaining the various benefit plans to participants. 

4. The Respondent's benefits counselor urged Petitioner to select Option Four of the various plans. 
This option provides a participant who retires before age 62 with a larger than normal monthly benefit until, 
the participant turns 62 to compensate for the unavailability of Social Security benefits. Then, at age 62, the 
monthly benefit is reduced to less than the normal benefit with the goal-that the combined monthly income 
from the retirement and Social Security benefits will approximate the monthly benefit paid prior to age 62. 
Because of the way it functions to keep income level during retirement. Option Four is called the social 
security leveling plan. 

5. Pursuant to North Carolina General Statute Section 135-5(g). the amount of money paid to a 
participant under Option Four must be the actuarial equivalent to an amount that would be paid under any of 
the other options. 

6. The agent for the Respondent did not show Petitioner any calculations or benefit schedules to 
compare Option Four to any of the other options she might elect. Instead. Respondent assured Petitioner she 
would not lose any money under Option Four, in comparison with the other options she could choose, until 
she was in her 80's. 

7. Petitioner elected Option Four on the basis of the urging by the benefits counselor that Option 
Four was the best choice for her. 

8. According to testimony from Timothy Bryan. Chief of Member Services for the Respondent, such 
suggestion or urging by a benefits counselor as to which plan or option is best is inappropriate and contrary 
to the training such benefit counselors receive. 

9. Relying on the benefit counselor's urging. Petitioner chose Option Four. 

10. Petitioner was assured, and the relevant statute requires, that she would receive under Option 
Four the actuarial equivalent of any other option. 



2373 7:20 NORTH CAROLINA REGISTER January 15, 1993 



CONTESTED CASE DECISIONS 



11. Petitioner presented evidence from the Respondent's own records that showed that, as of, 
December 1991, she had received approximately $7,100.00 less in benefits from the retirement system under 
Option Four than she would have received under Option One, another of the benefit plans she could have 
chosen in 1976. This amount is on contrast to the promise that she would not lose money until she was in 
her 80's; Petitioner is 76. 

12. Timothy Bryan testified that the calculations for the various benefit options were made by 
actuaries working for the Respondent in accordance with standard actuarial practice. 

13. Mr. Bryan is not himself an actuary and does not participate in the actuarial determinations made 
by Respondent. 

14. Petitioner provided no evidence at the hearing concerning the calculation of the actuarial value 
of the money Petitioner had received under Option Four in comparison to what would have Option One. 

15. The hearing was adjourned and the record left open to allow Petitioner the opportunity to provide 
evidence that the amount she had received was less in actuarial terms than what was available under another 
option. Petitioner could not provide such evidence. 

Based on the foregoing Stipulations and Findings of Fact, the Administrative Law Judge makes the 
following: 

CONCLUSIONS OF LAW 

1. The parties were properly before the Office of Administrative Hearings. 

2. The System is paying retirement benefits to Petitioner under the provisions of North Carolina 
General Statute Section 135-5(g). 

Based on the foregoing Stipulations. Findings of Facts, Conclusions of Law, and a preponderance of 
the substantial evidence in the record, the Administrative Law Judge makes the following: 

RECOMMENDED DECISION 

That the appeal of the Petitioner is DENIED. 

ORDER 

It is hereby ordered that the agency serve a copy of the final decision an the Office of Administrative 
Hearings, P.O. Drawer 27447, Raleigh, N.C. 2761 1-7447, in accordance with North Carolina General Statute 
Section 150B-36(b). 

NOTICE 

The agency making the final decision in this contested case is required to give each party an 
opportunity to file exceptions to this recommended decision and to present written arguments to those in the 
agency who will make the final decision. North Carolina General Statute Section 150B-36(a). 

The agency is required by G.S. 150B-36(b) to serve a copy of the final decision on all parties and to 
furnish a copy to the parties" attorney of record and to the Office of Administrative Hearings. 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2374 



CONTESTED CASE DECISIONS 



The agency that will make the final decision in this contested case is the Board of Trustees of the 
Teachers and State Employees Retirement System. 



This the 23rd dav of December. 1992. 



I 



Sammie Chess. Jr. 
Administrative Law Judse 



2375 7:20 NORTH CAROLINA REGISTER January 15, 1993 



CONTESTED CASE DECISIONS 



STATE OF NORTH CAROLINA 



COUNTY OF DARE 



IN THE OFFICE OF 
ADMINISTRATIVE HEARINGS 
92 EHR 0923 




This matter came on for hearing before the undersigned administrative law judge on November 30, 
1992, in Manteo. 

The petitioner appeared rjro se. Mr. Timothy D. Nifong represented the respondent. The petitioner 
presented one witness and introduced three exhibits. The respondent presented two witnesses and introduced 
four exhibits. 

ISSUES 

Did the respondent lack probable cause in seizing the petitioner's clams? 
If so, what compensation is the petitioner entitled to? 

FINDINGS OF FACT 

1 . On March 4, 1992, a law enforcement officer, employed by respondent, inspected the petitioner's 
seafood operation. The officer observed four small yellow bags of clams from Virginia labeled "Thomas E. 
Reed Seafood, Inc., Necks from Natural Bottom, to Manns Harbor Fisheries." The label also indicated that 
the clams were "under inch." The officer determined, after using a clam grader, that 69% of the clams were 
undersized. 

2. Mr. Tatem informed the officer that the clams were purchased from an aquacultural operation. Mr. 
Tatem and the officer consulted a handbook with applicable fisheries regulations. The handbook contained 15A 
NCAC 3K .0305(b) (Eff. January 1, 1991) which stated: 

Possession and sale of clams by a hatchery or clam aquacultural operation and purchase and 
possession of clams from a hatchery or clam aquacultural operation shall be exempt from bag 
and size limit restrictions in 15A NCAC 3K .0301(a). It is unlawful to possess, sell, 
purchase, or transport such clams unless they are identified in a manner that will permit 
immediate determination of the point of origin and the ultimate destination. 

3. The officer seized the 760 clams. The officer's supervisor determined that an error had been made. 
The officer attempted to return the clams. However, Mr. Tatem would not accept the clams because of 
possible damage to the clams while the clams were not in his possession and control. 



4. At 2:43 p.m. on March 4, 1992, the officer disposed of 120 pounds of clams at the sanitary 



landfill. 



5. Thereafter, the Officer completed a citation charging C. V. Tatem with possessing undersize clams. 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2376 



CONTESTED CASE DECISIONS 



6. Clams are regularly bought and sold in North Carolina by the count. The wholesale price paid by 
the petitioner was 17 cents per clam. The retail price expected by the petitioner was 25 cents per clam. 

CONCLUSIONS OF LAW 

1 . The officer lacked probable cause in seizing the 760 clams. Probable cause is determined by what 
the officer knew at the time of the seizure. Mr. Tatem informed the officer that the clams were from an 
aquacultural operation. The bags indicated the point of origin and the ultimate destination as required by the 
rule which both Mr. Tatem and the officer consulted before the seizure of the clams. According to the rule, 
the seized clams were exempt from bag and size limit restrictions. 

2. The petitioner is entitled to compensation from the respondent pursuant to GS 113-137 in the 
amount of $129.20 (760 X .17 = $129.20). 

RECOMMENDED DECISION 

It is recommended that the respondent compensate the petitioner in the amount of $129.20. 

ORDER 

It is hereby ORDERED that the agency serve a copy of the Final Decision on the Office of 
Administrative Hearings, P.O. Drawer 27447, Raleigh, N.C. 2761 1-7447. in accordance with North Carolina 
General Statutes 150B-36(b). 

NOTICE 

The final decision in this contested case shall be made by the respondent. Each party has the right to 
file exceptions to the recommended decision and to present written arguments on the decision to this agency. 

The agency is required by GS 150B-36(b) to serve a copy of the final decision on all parties and to 
furnish a copy to the parties' attorney of record and to the Office of Administrative Hearings. 



( 



This the 29th day of December, 1992. 



Robert Roosevelt Reilly, Jr. 
Administrative Law Judge 



2377 7:20 NORTH CAROLINA REGISTER January 15, 1993 



CONTESTED CASE DECISIONS 



Ihe North Carolina Administrative Code (NCAC) has four major subdivisions of rules. Two of these, 
titles and chapters, are mandatory. The major subdivision of the NCAC is the title. Each major 
department in the North Carolina executive branch of government has been assigned a title number. 
Titles are further broken down into chapters which shall be numerical in order. TJie other two. 
subchapters and sections are optional subdivisions to be used by agencies when appropriate. 



TITLE/MAJOR DIVISIONS OF THE NORTH CAROLINA ADMINISTRATIVE CODE 
TITLE DEPARTMENT LICENSING BOARDS CHAPTER 



1 


Administration 




Architecture 


2 


2 


Agriculture 




Auctioneers 


4 


3 


Auditor 




Barber Examiners 


6 


4 


Economic & Community Development 


Certified Public Accountant Examiners 


8 


5 


Correction 




Chiropractic Examiners 


10 


6 


Council of State 




General Contractors 


12 


7 


Cultural Resources 




Cosmetic Art Examiners 


14 


8 


Elections 




Dental Examiners 


16 


9 


Governor 




Dietetics/Nutrition 


17 


10 


Human Resources 




Electrical Contractors 


18 


1 1 


Insurance 




Electrolysis 


19 


12 


Justice 




Foresters 


20 


13 


Labor 




Geologists 


21 


14A 


Crime Control & Public 


Safety 


Hearing Aid Dealers and Fitters 


22 


15A 


Environment, Health, and Natural 


Landscape Architects 


26 




Resources 




Landscape Contractors 


28 


16 


Public Education 




Marital and Family Therapy 


31 


17 


Revenue 




Medical Examiners 


32 


18 


Secretary of State 




Midwifery Joint Committee 


33 


19A 


Transportation 




Mortuary Science 


34 


20 


Treasurer 




Nursing 


36 


21 


Occupational Licensing 


Boards 


Nursing Home Administrators 


37 


22 


Administrative Procedures 


Occupational Therapists 


38 


23 


Community Colleges 




Opticians 


40 


24 


Independent Agencies 




Optometry 


42 


25 


State Personnel 




Osteopathic Examination & Reg. (Repealed) 


44 


26 


Administrative Hearings 




Pharmacy 

Physical Therapy Examiners 

Plumbing, Heating & Fire Sprinkler Contractors 

Podiatry Examiners 

Practicing Counselors 

Practicing Psychologists 

Professional Engineers & Land Surveyors 

Real Estate Commission 

Refrigeration Examiners 

Sanitarian Examiners 

Social Work 

Speech & Language Pathologists & Audiologists 

Veterinary Medical Board 


46 
48 
50 
52 
53 
54 
56 
58 
60 
62 
63 
64 
66 



Note: Title 21 contains the chapters of the various occupational licensing boards. 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



2378 



CUMULATIVE INDEX 



CUMULATIVE INDEX 

(April 1992 - March 1993) 



Pages 



Issue 



1 - 105 1 April 

106 - 173 2 April 

174 - 331 3 - May 

332 - 400 4 - May 

401 - 490 5 - June 

491 - 625 6 - June 

626 - 790 7 July 

791 - 902 8 July 

903 965 9 - August 

966 - 1086 10 - August 

1087 - 1 154 11 September 

1 155 - 1253 12 September 

1254-1350 13 October 

1351 1463 14 - October 

1464 - 1640 15 November 

1641 - 1720 16 - November 

1721 - 1828 17 December 

1829 - 2059 18 - December 

2060 - 2215 19 - January 

2216 - 2381 20 - January 

ADMINISTRATION 

Auxiliary Services. 4 

Motor Fleet Management Division. 794 

AGRICULTURE 

Gasoline and Oil Inspection Board. 336 

Pesticide Board. 1276 

Plant Industry, 904. 2219 

Structural Pest Control Committee. 332 

Veterinary Division. 342 

COMMUNITY COLLEGES 

Community Colleges. 1535 
General Provisions. 1531 
Miscellaneous Programs. 1598 

CULTURAL RESOURCES 

Archives and History. 2224 
U.S.S. Battleship Commission. 91 1 

ECONOMIC AND COMMUNITY DEVELOPMENT 

Banking Commission. 629. 1467 
Community Assistance. 909, 968 
Departmental Rules. 801 
Savings Institutions Division. 1833 

ENVIRONMENT. HEALTH. AND NATURAL RESOURCES 

Adult Health. 1199 

Coastal Management. 21 1. 655. 1098, 1507 



2379 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



CUMULATIVE INDEX 



Departmental Rules, 826, 1852 

Environmental Health, 223 

Environmental Management, 190, 416, 500, 644, 830, 1013, 1487, 1856, 2086, 2308 

Governor's Waste Management Board, 564, 920, 1 197 

Health: Epidemiology, 140, 1212 

Health: Personal Health, 1217 

Health Services, 52, 659, 1174, 1736, 1985, 2141 

Marine Fisheries, 530 

NPDES Permits Notices, 1, 107 

Radiation Protection, 136, 1520, 1863, 2087 

Sedimentation Control, 920 

Vital Records, 565 

Wildlife Resources Commission, 28, 133, 408, 449, 551, 921, 1299, 1414, 1658, 1736 

Wildlife Resources Commission Proclamation, 176, 2082 

FINAL DECISION LETTERS 

Voting Rights Act, 106, 174, 406, 493, 628, 793, 966, 1090, 1275, 1465, 1644, 1721 

GENERAL STATUTES 

Chapter 150B, 1254, 2060 

GOVERNOR/LT. GOVERNOR 

Executive Orders, 401, 491, 626, 791, 903, 1087, 1155, 1351, 1464, 1641, 1829, 2081, 2216 

HUMAN RESOURCES 

Aging, Division of, 121, 346 

Day Care Rules, 123 

Economic Opportunity, 5 

Facility Services, 111, 177, 496, 634, 980, 1352, 1647 

Medical Assistance, 4, 415, 496, 816, 989, 1156, 1295, 1391, 1649, 1723, 1842, 2083, 2228 

Mental Health, Developmental Disabilities and Substance Abuse Services, 111, 297, 409, 809, 1092, 1276 

2225 
Social Services Commission, 183, 911, 1471 

INDEPENDENT AGENCIES 

Housing Finance Agency, 450, 576, 928, 1219 
Safety and Health Review Board, 2190 

INSURANCE 

Actuarial Services Division, 1411 

Admission Requirements, 2304 

Agent Services Division, 1410 

Consumer Services Division, 125, 1157, 2239 

Departmental Rules, 7, 1095, 1405 

Engineering and Building Codes, 19, 643 

Financial Evaluation Division, 1162, 1849, 2242 

Fire and Rescue Services Division, 17, 1406 

Hearings Division, 124, 1096 

Life and Health Division, 22, 347, 1 167, 2300 

Market Conduct Division, 1850 

Medical Database Commission, 1650 

Property and Casualty Division, 20, 1848 

Seniors' Health Insurance Information Program, 132 



7:20 NORTH CAROLINA REGISTER January 15, 1993 2380 



CUMULATIVE INDEX 



JUSTICE 

Alarm Systems Licensing Board, 27, 189, 643, 919, 1414, 1486, 1732 

Criminal Information, 1097 

General Statutes Commission, 353 

Private Protective Services, 918, 1731 

Sheriffs Education and Training, 990 

State Bureau of Investigation, 188, 499, 1413 

LICENSING BOARDS 

Architecture, 1111 

Certified Public Accountant Examiners, 355 

Chiropractic Examiners, 1416 

Cosmetic Art Examiners, 360, 922, 1669, 2331 

Dietetics/Nutrition, 923 

Electrical Contractors, 1785, 2332 

Electrolysis Examiners, 69, 700 

Geologists, 1792 

Medical Examiners, 1304, 1417. 1987 

Mortuary Science, Board of, 2184 

Nursing, Board of, 232, 700, 1528 

Opticians, 1793 

Optometry, 2338 

Pharmacy, Board of, 1418 

Professional Engineers and Land Surveyors, 566 

Speech and Language and Pathologists and Audiologists, 705 

LIST OF RULES CODIFIED 

List of Rules Codified. 72. 362, 452, 584, 1671, 2352 

PUBLIC EDUCATION 

Departmental Rules, 1 108 

Elementary and Secondary, 852, 1 108, 1666 

REVENUE 

License and Excise Tax, 712 
Motor Fuels Tax, 361 

STATE PERSONNEL 

Office of State Personnel, 237, 705. 1113, 1419, 2005 

TAX REVIEW BOARD 

Orders of Tax Review, 494 

TRANSPORTATION 

Highways, Division of, 228, 856, 1062, 1110, 1669. 1781 
Motor Vehicles, Division of, 68, 142 



2381 



7:20 



NORTH CAROLINA REGISTER 



January 15, 1993 



NORTH CAROLINA ADMINISTRATIVE CODE 



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